10-Q: PNM Resources Reports Q1 2024 Earnings, Impacted by Weather and Regulatory Changes

PNM Resources' Q1 2024 earnings were affected by milder weather, regulatory disallowances, and increased expenses, despite gains from investment securities and rate relief.

Summary

• PNM Resources reported net earnings attributable to PNMR of $47.2 million, or $0.52 per diluted share, for the three months ended March 31, 2024, compared to $55.0 million, or $0.64 per diluted share, for the same period in 2023.
• The decrease in earnings was primarily due to milder weather, regulatory disallowances, and increased expenses.
• These factors were partially offset by gains from investment securities, rate relief approved in PNMs 2024 Rate Case, and higher transmission margin and distribution rates at TNMP.
• Electric operating revenues decreased to $436.9 million from $544.1 million year-over-year.
• The company is focused on maintaining strong employee safety, delivering a superior customer experience, and demonstrating environmental stewardship.
• PNM anticipates filing a general rate case during 2024 with rates requested to be implemented during 2025.
• TNMP experienced a 2.7% increase in volumetric weather normalized retail load compared to 2023.
• PNM experienced a decrease of 1.5% in weather normalized residential load, an increase of 1.6% in commercial load, and an increase of 10.0% in industrial load compared to 2023.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While earnings are down, the company is taking steps to address challenges and invest in future growth and sustainability.

Positives

• Gains on investment securities contributed positively to earnings.
• Rate relief approved in PNMs 2024 Rate Case provided some benefit.
• TNMP experienced higher transmission margin and distribution rates.
• TNMP experienced higher volumetric load.
• PNM experienced higher weather normalized retail load.
• PNM experienced decreased operational and maintenance expense primarily due to the disposition of the PVNGS Unit 2 Leased Interest.

Negatives

• Milder weather negatively impacted earnings.
• Regulatory disallowances at PNM related to San Juan Coal Mine reclamation remeasurement reduced earnings.
• Higher employee related, outside services and vegetation management expenses at PNM and TNMP increased costs.
• Increased depreciation and amortization approved in PNMs 2024 Rate Change and increased plant in service at PNM and TNMP increased costs.
• Lower transmission margin at PNM decreased revenues.
• Capacity arrangements at PNM increased costs.
• Higher interest charges at PNM, TNMP and Corporate and Other increased costs.

Risks

• The company faces risks related to climate change and severe weather events.
• There are risks associated with the cost and completion of generation, transmission, distribution, and other projects.
• The company is exposed to credit risk from its retail and wholesale customers, as well as the counterparties to derivative instruments.
• The company is exposed to interest rate risk to the extent variable interest rates continue to rise.
• The company is exposed to equity market risk due to investments held in trusts for decommissioning and reclamation.
• The company faces risks related to the potential for regulatory orders, legislation or rulemakings that provide for municipalization of utility assets or public ownership of utility assets, including generation resources, or which would delay or otherwise impact the procurement of necessary resources in a timely manner.

Future Outlook

PNM anticipates filing a general rate case during 2024 with rates requested to be implemented during 2025 and continues to work with the other Four Corners owners to update the necessary project agreements to reflect continued participation.

Industry Context

The announcement reflects the ongoing challenges and transitions within the utility industry, including the shift towards renewable energy, regulatory pressures, and the impact of weather on financial performance.

Comparison to Industry Standards

• The company benchmarks performance of PNM and TNMP against other utilities using industry-standard metrics, including System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI).
• The company is a member of the EEI Index and compares its Total Shareholder Return to the other utilities included in the EEI Index.
• The company is a member of the National Electric Highway Coalition, which plans to build fast-charging ports along major U.S. travel corridors.
• The company is a member of the Electric Power Research Institute (EPRI) Climate READi (Resilience and Adaptation) Initiative, a three-year initiative to develop a comprehensive and consistent approach to physical climate risk and facilitate the analysis and application of appropriate climate data among all stakeholders to enhance the planning, design and operation of a resilient power system.

Stakeholder Impact

• Customers may see changes in rates due to regulatory proceedings and investments in infrastructure.
• Shareholders may be impacted by the company's financial performance and ability to pay dividends.
• Employees may be affected by cost control efforts and changes in the company's operations.

Next Steps

• PNM will file a general rate case with the NMPRC on or before June 14, 2024.
• TNMP will issue the third and fourth series of TNMP 2024 Bonds on or before July 1, 2024.
• PNM will continue to work with the other Four Corners owners to update the necessary project agreements to reflect continued participation.

Key Dates

Keywords

earnings, PNM Resources, TNMP, PNM, rate case, regulatory, weather, expenses, revenue, utility