PNM Resources Inc (PNM)
Q2 2010 Earnings Conference Call
August 6, 2010, 11:00 AM ET
Gina Jacobi - Director IR
Pat Collawn - President, COO, PNM Resources
Chuck Eldred - CFO, EVP
Lasan Johon - RBC Capital
Brian Russo - Ladenburg Thalmann
Paul Fremont - Jefferies
Mike Bolte - Wells Fargo
Nathan Judge - Atlantic Equities
[Jose Gaza] - Gabelli & Company
[Edward Payne - Catapult]
John Ali - Decade Capital
Previous Statements by PNM
» PNM Resources, Inc. Q1 2010 Earnings Call Transcript
» PNM Resources, Inc. Q4 2009 Earnings Call Transcript
» PNM Resources, Inc. Q3 2009 Earnings Call Transcript
Good morning, ladies and gentlemen, and welcome to the PNM Resources second quarter conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session with instructions following at that time. (Operator Instructions) As a reminder, this conference is being recorded. Now your host for today's conference, Gina Jacobi, Director of Investor Relations. Please begin.
Thank you, everyone, for joining us this morning for a discussion of the company's second 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 statement 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. With that, I'll turn the call over to Pat.
Thank you, Gina. Good morning, everyone, and let me add my thanks to Gina for having you join us this morning. I'm going to start with slide 4 this morning. By now most of you probably have seen our second quarter news release that was issued earlier this morning reporting our ongoing earnings of $0.21 per diluted share. This equaled our quarterly results from a year ago.
Our GAAP earnings are up significantly compared with last year. You might remember that in 2009 we had several special items including regulatory disallowances and increases in legal reserves that lowered our GAAP results.
As we stated in our news release, quarterly results were driven primarily by modest improvement from our utilities, PNM and TNMP, both which benefitted from low growth compared with last year and higher rates that were in effect this year. While both utilities improved slightly, we still have numerous regulatory matters to address in order for PNM and TNMP to have an opportunity to earn their allowed returns.
As expected, First Choice Power was down from a year ago as we saw average retail margins compressed. However, First Choice Power continues to do a good job of reducing its bad debt expense.
As all of you follow the energy industry, you are well aware of the continued low-price market in Texas that has had a negative impact on generators throughout ERCOT. Optim Energy is no exception. But because of strong operational performance at their three power plants, Optim Energy has been able to minimize the impact of ERCOT's depressed power market. I will discuss First Choice and Optim Energy in more detail in a minute.
If we turn to slide 5, I'll provide an update on our regulatory activities. This is a new slide in our presentation and we are hopeful it helps you track our regulatory matters for both PNM and TNMP. I won't go through each of the cases but I wanted to let you know we will add this slide to our appendix moving forward and we will update it as things change.
A couple of cases to note; the first is the 2010 Renewable case, the first item on the list. On Tuesday a hearing examiner issued a recommended decision to deny the stipulation reached in this case. You'll remember that this is the 80 megawatt solar plant.
We are disappointed in the hearing examiner's recommended decision especially because the stipulation we filed included a great deal of input from stakeholders and was signed by numerous parties including Western Resource Advocates, the Coalition for Clean and Affordable Energy, the City and County of Sante Fe and the New Mexico Department of Minerals and Natural Resources.
We are also disappointed that the hearing examiner did not provide direction on what an acceptable plan would look like. The next step in this case are for exceptions to be filed by August 11 and then the Commission will address the case by August 31.
We have to recognize that this is just a recommended decision and not the final order. In the past, the PRC has departed from a recommendation in making its final order and we are hopeful the Commission reaches a difference conclusion but we remain committed to not turning any dirt until we have regulatory approval for cost recovery.
The second case of note, of course, is PNM's Future-Test-Period filings. Let's turn to slide 6 for a discussion of that case. As most of you know by now, on July 27, the New Mexico Public Regulation Commission issued an order that extended the suspension period by one month and required PNM to file additional budgetary information.