Business context and reporting period
Combined unaudited Form 10-Q for PNM Resources, Inc. (PNMR), Public Service Company of New Mexico (PNM), and Texas-New Mexico Power Company (TNMP), for the quarter ended March 31, 2024. PNMR is a holding company with regulated electric utilities serving approximately 827,000 customers and end-users in New Mexico and Texas. The supplied filing identifies PNMR, not TXNM Energy Inc., as the registrant.
Financial performance
Amounts below are in millions of dollars unless noted. The comparable period is the three months ended March 31, 2023.
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| PNMR electric operating revenues | $436.9 | $544.1 | Down $107.2 |
| PNMR utility margin (non-GAAP) | $304.6 | $302.4 | Up $2.2 |
| PNMR operating income | $80.6 | $99.1 | Down $18.5 |
| PNMR net earnings attributable to PNMR | $47.2 | $55.0 | Down $7.8 |
| Diluted earnings per share | $0.52 | $0.64 | Down $0.12 |
| PNMR operating cash flow | $92.8 | $131.5 | Down $38.7 |
Revenue fell mainly because PNM wholesale energy sales and related pass-through energy costs were lower. Utility margin, which management uses to assess operations, increased modestly. PNMR earnings were supported by TNMP’s improved results and gains on investment securities, but weighed down by lower PNM earnings, higher depreciation and interest costs, and a $4.5 million PNM reclamation-related regulatory disallowance.
PNM net earnings available for common stock were $41.9 million versus $54.6 million. TNMP net earnings rose to $14.6 million from $10.0 million, reflecting higher transmission and distribution rates and load growth. PNMR declared a quarterly common dividend of $0.3875 per share, versus $0.3675 a year earlier.
Financial position, debt and liquidity
At March 31, 2024, PNMR reported total assets of $10.26 billion, total liabilities of $7.84 billion, and total equity of $2.40 billion. Balance-sheet debt included $4.36 billion of long-term debt, net, $283.8 million of current long-term debt installments, and $244.5 million of short-term debt. PNMR’s operating cash flow was below the prior-year quarter; investing cash outflow was $184.4 million, including $289.1 million of plant additions and $116.9 million of proceeds from the NMRD sale.
As of April 26, total availability under revolving and other listed credit facilities was $644 million on a consolidated basis. Management said available resources and capital-market access should meet requirements for at least the next 12 months, while additional long-term financing, potentially including debt and/or equity, is expected to help fund 2024–2028 requirements. The company reported compliance with debt covenants.
Material changes, outlook and key risks
- Capital program: Projected 2024–2028 capital requirements total approximately $6.75 billion, including $6.05 billion of construction expenditures and dividends. Estimates remain subject to review and exclude certain incremental growth and expansion spending.
- Rates and regulation: PNM’s 2024 rate order authorized a $15.3 million non-fuel base-rate increase, effective January 15, versus its $63.8 million request, and set an authorized ROE of 9.26%. The order included an $81 million Four Corners net-book-value disallowance and customer refunds related to leased PVNGS capacity. PNM expected to file its next general rate case by June 14, 2024. TNMP filed for a $15.9 million annual distribution revenue increase on April 1; that request remained pending.
- Financing: TNMP issued $117 million of first-mortgage bonds in March and agreed to issue a further $168 million by July 1, subject to conditions. The proceeds are intended partly to repay existing debt and fund capital needs. PNMR, PNM, and TNMP amended or replaced credit facilities on April 1, extending maturities and increasing TNMP’s facility capacity.
- Unusual items: PNMR sold its NMRD equity-method investment on February 27 for net proceeds of approximately $117 million and recorded a $4.4 million after-tax gain, including recognition of deferred investment tax credits. PNM’s 2024 mine-reclamation study increased estimated total costs by $20.9 million; the filing recorded a $4.5 million disallowance because customer recovery for surface-mine reclamation is capped.
- Generation and transition: PNM’s 2023 IRP, focused on a carbon-free energy system by 2040, was accepted by the NMPRC in April. PNM reported that its updated analysis supported remaining in Four Corners through the current coal-supply agreement’s 2031 expiration. Resource approvals, developer delays, reliability needs, and the costs and recoverability of environmental and reclamation obligations remain relevant uncertainties.
- Risks and contingencies: Key risks include regulatory cost recovery and rate outcomes; rising interest rates and refinancing needs; wildfire exposure and potential liability; extreme weather and water availability; generation and project delays; environmental rules and compliance costs; and mine reclamation, decommissioning, and spent-fuel obligations. The filing says the ultimate outcomes or amounts for several proceedings and obligations cannot be predicted clearly.
- Guidance: The filing provides capital and dividend objectives but no specific full-year earnings or EPS guidance. PNMR targets a dividend payout ratio of 50%–60% of ongoing earnings, a non-GAAP measure.
Important facts for investors to verify
- Confirm the registrant and ticker relevant to the investment: this filing is for PNMR, PNM, and TNMP, and the supplied text does not establish a TXNM Energy Inc. filing identity.
- Track PNM’s next rate case, appeals of the 2024 rate order, and the effects of the Four Corners and PVNGS disallowances and customer refunds.
- Assess whether planned capital spending, debt maturities, and anticipated financing can be funded while maintaining credit metrics and investment-grade ratings.
- Monitor PNM’s summer resource adequacy, approvals and delivery schedules for replacement resources, and TNMP’s pending distribution-rate request.
- Review developments in reclamation estimates and funding, wildfire exposure, and federal and state environmental regulations for potential costs not recoverable from customers.