PNM Resources CEO Discusses Q3 2010 Results – Earnings Call Transcript

PNM Resources CEO Discusses Q3 2010 Results â¿¿ Earnings Call Transcript
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PNM Resources, Inc. (

PNM

)

Q3 2010 Earnings Call Transcript

October 29, 2010 11:00 am ET

Executives

Gina Jacobi – Director, IR

Pat Vincent-Collawn – President and CEO

Chuck Eldred – EVP and CFO

Brian Hayduk – President, First Choice Power

Analysts

Emily Christy [ph]

Brian Russo – Ladenburg Thalmann

Ted Heyn [ph]

Eric McCarthy [ph]

Maurice May – Soleil-Power Insights

John Ali [ph]

Presentation

Operator

Compare to:
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» PNM Resources, Inc. Q3 2009 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to your PNM Resources third quarter conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) As a reminder, today's call is being recorded.

At this time, I would now like to turn the conference over to our host, the Director of Investor Relations, Ms. Gina Jacobi. You may begin.

Gina Jacobi

Thank you, everyone for joining us this morning for a discussion of the company's third quarter 2010 earnings. Please note that the presentation and accompanying materials for this conference call and supporting documents are available on PNM Resources' website at www.pnmresources.com.

Joining me today are PNM Resources' CEO, Pat Collawn; and Chuck Eldred, our Chief Financial Officer; as well as several members of our executive management team.

Before I turn the call over to Pat, I need to remind you that some of the information provided this morning should be considered forward-looking statements, pursuant to the Private Securities Litigation Reform Act of 1995. We caution you that all of the forward-looking statements are based upon current expectations and estimates and that PNM Resources assumes no obligation to update the information.

For a detailed discussion of factors affecting PNM Resources' results, please refer to our current and future annual reports on Form 10-K and the quarterly reports on Form 10-Q, as well as other current and future reports on Form 8-K filed with the SEC.

And with that, I'll turn the call over to Pat.

Pat Vincent-Collawn

Thank you, Gina and good morning, everyone. This morning, we released our third quarter results of $0.63 per diluted share, which equaled quarterly results from 2009. Year-to-date, our ongoing earnings are $0.90 compared with $0.94 this time last year. You may remember, however, that last year's results included $0.08 from our gas business, which we have since sold.

I know our quarterly and year-to-date results are above some street estimates and Chuck will walk you through the drivers that positively impacted our performance so far this year. As we stated in our news release, quarterly results were driven primarily by improvement from our utilities, PNM and TNMP, both of which benefited from weather-normalized load growth, increased demand as a result of warmer weather, and rate increases that were at effect for the full quarter.

As expected, we are seeing a downward trend in First Choice Power's earnings. Average retail margins continues to compress, albeit not as tightly as we had expected. And First Choice continues to do a good job of reducing its bad debt expense, which I will discuss shortly in more detail.

Optim Energy, along with other Texas generators, continues to manage through a very challenging market in ERCOT. We are still seeing very low market prices, but strong operational performance at Optim's three power plants, and an increase in ancillary services has helped to mitigate the impact of low-price market for Optim. And finally, because of that warmer weather and better-than-expected performance by First Choice Power, we have increased our ongoing earnings guidance for 2010.

These are the highlights for the quarter. So if you turn to Slide 5, I'll provide an update to you on our regulatory activities. We now have two rate cases ongoing for PNM. Regarding the current retail case, which is our forward test period case, the procedural schedule was reset and we now have a hearing date starting on January 31st.

On Wednesday, we filed a PNM FERC transmission case. We have asked for an $11.1 million increase in revenue, a 12.25% return on equity and for rates to be implemented on January 1st, 2011. As this case's schedule becomes more firm, we will provide you with key dates of that proceeding.

At TNMP, on August 26th, we filed a general rate case asking for $20.1 million and an ROE of 11.5%. This docket is on a 185-day timeline. The Public Utilities Commission of Texas is focused on getting through cases within their established 185-day window and we are more than happy to comply with that. So we expect for this case to be resolved and effective by February 28th, 2011.

If you turn to Slide 6, I want to quickly recap the recent decisions by the New Mexico PRC regarding PNM's renewable energy plan. A scaled-down version of our original plan was unanimously approved on August 30th. This plan calls for the construction of a total of 22 megawatt of utility-scale solar at five sites. The recovery is capped at $101.7 million, which is the estimated cost of this project.

The Commission also approved a 500 kilowatt battery storage project with solar that is partially funded by a grant from the U.S. Department of Energy. They also modified our residential and business solar incentive programs and expanded those programs to include solar electric thermal systems. Cost of these solar programs will be recovered through a rider that will begin in 2012. And as we stated previously, we expect to increase the rate base to add $0.03 to $0.05 to our 2012 earnings per share.

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