ALBUQUERQUE, N.M.--(BUSINESS WIRE)--
PNM Resources (NYSE: PNM)
1st QUARTER HIGHLIGHTS
-- GAAP earnings of $0.38 per diluted share
-- Ongoing earnings of $0.39 per diluted share
-- First Choice Power customer growth and sales volumes improve
earnings
-- 2007 earnings guidance range affirmed
PNM Resources (NYSE: PNM) today reported unaudited first quarter
2007 consolidated ongoing earnings per diluted share of $0.39. The
company also reported quarterly GAAP (generally accepted accounting
principles) earnings of $0.38 per diluted share. Both ongoing and GAAP
earnings per diluted share equaled 2006 quarterly results of $0.39 and
$0.38, respectively.
Ongoing earnings exclude acquisition-related costs and other
non-recurring charges and revenue. A reconciliation of GAAP to ongoing
earnings is provided on Schedule 1.
Quarterly ongoing earnings available for common stock increased
14.2 percent to $30.7 million. However, a 12.6 percent increase in the
average number of common shares outstanding resulted in overall
ongoing earnings per diluted share to remain the same as the first
quarter of 2006.
"We continued to demonstrate strong growth in net earnings,
although this performance was not reflected in earnings per share
results. We saw significant improvement at the Palo Verde Nuclear
Generating Station this quarter," said Jeff Sterba, PNM Resources
chairman, president and CEO. "In addition, we had continued good
performance from First Choice Power - the result of its growth
strategy in action. Negatively impacting our earnings were increased
coal costs and reduced availability at our base load coal plants.
"Our energy joint venture is progressing and a strong, core
management team is being established. The building blocks soon will be
in place for additional growth with the planned contribution of Twin
Oaks Power during the second quarter."
Palo Verde had strong performance during the quarter with an
equivalent availability factor of 92.5 percent, compared with 70.5
percent during the same period in 2006. However, an extended
maintenance outage for Unit 2 at the San Juan Generating Station and
forced outages at the Four Corners Plant partially offset Palo Verde's
contribution.
FIRST QUARTER 2007 SEGMENT REPORTING
Regulated Operations
PNM - a natural gas and vertically integrated electric and gas
utility in New Mexico with distribution, transmission and generation
assets.
Electric:
Beginning in 2007, the PNM Electric segment includes the territory
in southern New Mexico formerly served by Texas-New Mexico Power Co.
-- PNM Electric reported earnings per diluted share of $0.13,
unchanged from the first quarter of 2006. Earnings increased
$1.5 million, or 17.6 percent, to $10.3 million and gross
margin increased $10.8 million, or 11.0 percent, to $109.3
million.
-- Increases in earnings and margin were driven primarily by
improved Palo Verde performance and a 3.2 percent increase in
load growth, which was partially offset by the rising costs to
serve increased demand. The addition of TNMP-New Mexico
operations also improved earnings. Earnings were reduced by an
increase in coal costs, and planned and forced outages at San
Juan and Four Corners, respectively.
Gas:
-- PNM Gas reported earnings per diluted share of $0.16, compared
with $0.15 during the quarter in 2006. Earnings increased $2.4
million to $12.8 million and gross margin increased $5.0
million to $54.8 million.
-- Colder weather and customer growth of 2.4 percent were
partially offset by continued customer conservation and
increased maintenance and repair costs.
TNMP - a transmission and distribution company in Texas.
Beginning in 2007, the TNMP Electric segment consists only of
Texas transmission and distribution operations.
-- TNMP reported earnings per diluted share of $0.01, compared
with $0.02 in 2006. Earnings decreased 19.7 percent to $0.9
million and gross margin decreased slightly to $33.8 million.
-- The collection of the competitive transition charge, which
began in December 2006, increased earnings but was more than
offset by the transfer of the southern New Mexico operations,
and higher transmission and distribution operating costs.
Unregulated Operations
Wholesale - a business segment consisting of the generation and
sale of electricity into wholesale markets.
-- Wholesale reported quarterly earnings per diluted share of
$0.09, compared with $0.13 in 2006. Gross margin increased
$21.1 million to $52.5 million. Increased operating and
maintenance expenses related to plant outages and the
additions of Twin Oaks and the Luna Energy Facility reduced
earnings. In addition, during the first quarter of 2006
Wholesale significantly benefited from robust forward sales
related to hurricane-driven prices that were not replicated in
2007.
-- Improved performance at Palo Verde added $0.04 to earnings per
diluted share while the addition of Twin Oaks added $0.02 to
earnings per diluted share.
First Choice Power - a competitive retail electric provider in
Texas.
-- First Choice Power reported quarterly earnings per diluted
share of $0.08, compared with $0.01 for 2006. Earnings
increased substantially to $5.9 million from $0.8 million and
gross margin increased $10.0 million to $24.8 million.
-- Performance largely was driven by strong business and
residential customer growth and a 33.1 percent increase in
sales volumes.
Corporate/Other - a business segment that reflects costs at the
holding company, PNM Resources. The segment includes Avistar and PNMR
Services Company, which provides corporate services to PNM Resources
and all of its subsidiaries.
-- Ongoing earnings per diluted share decreased to $(0.08) in
2007 from $(0.05) in 2006, mainly driven by increased
financing charges related to short-term borrowings. GAAP
earnings per diluted share also decreased $0.03, from $(0.06)
in 2006 to $(0.09) in 2007.
TWIN OAKS CONTRIBUTION TO ENERGYCO and EARNINGS GUIDANCE
PNM Resources today also provided updates regarding EnergyCo, its
joint venture with a wholly owned subsidiary of Cascade Investment,
L.L.C.
Chuck Eldred, PNM Resources senior vice president and CFO, said
the company expects to contribute the Twin Oaks Power plant to the
joint venture on or about June 1, 2007. He said PNM Resources and the
Cascade subsidiary have agreed on a fair market value for Twin Oaks of
approximately $554 million, which includes two existing power sales
agreements and the development rights for a possible 600-megawatt
expansion.
Under the terms of a non-binding letter of intent, the Cascade
subsidiary would make a cash contribution to EnergyCo that is equal to
50 percent of Twin Oaks' fair market value, or approximately $277
million. EnergyCo then would distribute the cash to PNM Resources.
Eldred said PNM Resources plans to use the approximate $277 million
distribution from EnergyCo to reduce its corporate debt.
"Contributing Twin Oaks to EnergyCo will improve PNM Resources'
financial position," Eldred said. "It also provides a solid foundation
for the future growth of EnergyCo. Twin Oaks brings a stable,
dependable revenue source with the potential of additional earnings
when the current under-market contract expires Sept. 30."
When PNM Resources acquired Twin Oaks in April 2006, it assumed
two power sales contracts. The first contract called for the delivery
of 100 percent of the plant's 305-megawatt capacity through September
2007. The second contract is for 75 percent of Twin Oaks' output from
October 2007 through December 2010.
Eldred said the June contribution of Twin Oaks is expected to
reduce 2007 earnings per diluted share by approximately $0.05. The
stated 2007 ongoing earnings guidance range remains unchanged at $1.80
to $2.00 per diluted share.
ENERGYCO MANAGEMENT ADDITION
Sterba, who also serves as an EnergyCo board member, said EnergyCo
has named its second management team member. Charles Kitowski, who
joined First Choice Power in June 2005 as vice president of Portfolio
Trading and Energy Supply and for the last year has been co-president
of First Choice Power, will serve as EnergyCo's president of Marketing
and Trading.
Kitowski has more than 15 years of experience in general
management, operations and finance in the energy and manufacturing
sectors. Prior to joining First Choice Power, he spent more than six
years with TXU Corporation in various finance and risk management
positions, including vice president of Risk Management. He holds a
bachelor's degree in mechanical engineering from Texas A&M University,
a master's degree in material science and engineering from the
University of Texas, and a master's degree in business administration
from Harvard University.
Kitowski joins Mark Kubow at EnergyCo. Kubow, who most recently
served as a vice president at BG Group and launched that company's
power business in North America, was named EnergyCo president of
Generation and Development on April 2.
OTHER COMPANY UPDATES
-- First Choice Power President: Jeff Weiser, who with Kitowski
served as co-president of First Choice Power, will now be
president of the retail energy provider. Weiser has more than
20 years of experience in general management, sales and
marketing, and corporate development, including 11 years in
senior management at TXU. Weiser holds a bachelor's degree in
economics and Spanish from Northwestern University, as well as
a master's degree in finance and marketing from
Northwestern's J.L. Kellogg Graduate School of Management.
-- Investor Relations Director: The company has named Gina Jacobi
director of Investor Relations and Shareholder Services.
Jacobi has served as director of Modeling and Forecasting for
PNM Resources since 2005. She has more than 20 years of
experience in financial planning and analysis, including
serving as director of Finance and Forecasting for TNMP.
Jacobi holds a bachelor's degree in management and Spanish
from Rice University, and a master's degree in management from
Northwestern's J.L. Kellogg Graduate School of Management.
-- Power Purchase Agreement: PNM has signed a 20-year agreement
with Black Hills Corporation to purchase the output of a
natural gas-fired power plant to be built in central New
Mexico. Black Hills will develop and operate the 149-megawatt,
simple-cycle facility, which is expected to be online in June
2008. PNM will purchase the fuel for the plant when it is
operational and has the option to acquire up to 50 percent
ownership.
-- PNM Gas Rate Case: The company continues to await the
recommended decision by a New Mexico Public Regulation
Commission hearing examiner regarding PNM's proposed $20.5
million increase to natural gas rates and services. Once the
recommended decision is made, the commissioners must review it
with a final decision due no later than June 29.
-- PNM Electric Rate Case: The procedural schedule regarding
PNM's request to increase general electric rates by $68.9
million has been established. Regulatory staff and intervener
testimony is due by Aug. 6. A hearing is scheduled for Sept.
5-14 and a final order is due Dec. 23.
FIRST QUARTER EARNINGS CALL
PNM Resources will conduct its first quarter 2007 earnings
conference call on Tuesday, May 8, at 9 a.m. Eastern.
Participants within the United States call: (866) 831-6267
Participants outside the United States call: (617) 213-8857
Pass code: 53333893
The call will be broadcast live and the presentation available at
www.PNMResources.com.
A transcript of the call also will be on PNM Resources' Web site
as soon as possible. A replay of the conference call will be available
through May 15, 2007:
Participants within the United States call: (888) 286-8010
Participants outside the United States call: (617) 801-6888
Pass code: 71764615
About PNM Resources
PNM Resources (NYSE: PNM) is an energy holding company based in
Albuquerque, N.M., with 2006 consolidated operating revenues of $2.5
billion. Through its utility and energy subsidiaries, PNM Resources
serves electricity to more than 835,000 homes and businesses in New
Mexico and Texas and natural gas to more than 492,000 customers in New
Mexico. Its utility subsidiaries are PNM and Texas-New Mexico Power.
Other subsidiaries include First Choice Power, a deregulated
competitive retail electric provider in Texas, and Avistar, an
unregulated energy technology company. With generation resources of
more than 2,770 megawatts, PNM Resources and its subsidiaries sell
power on the wholesale market throughout the Southwest, Texas and the
West. The company also owns a 50-percent share of an energy joint
venture with Cascade Investment, L.L.C. For more information, visit
www.PNMResources.com.
About Cascade Investment
Based in Kirkland, Wash., Cascade Investment, L.L.C., oversees the
personal investments of William H. Gates III and the investment assets
of the Bill & Melinda Gates Foundation.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
Statements made in this earnings release 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 the new limited liability company in which the
Company has a 50% interest, and which temporarily is named "EnergyCo",
is unable to identify and implement profitable acquisitions or that
the contribution of assets to EnergyCo by PNMR may not be implemented
as expected, the potential unavailability of cash from the Company's
subsidiaries due to regulatory, statutory and 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
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 PVNGS, SJGS and Four Corners, and transmission
systems, , the ability to secure long-term power sales, the risks
associated with completion of the construction of generation,
including pollution control equipment at the San Juan Generating
Station and the expansion of the Afton Generating Station,
transmission, distribution and other projects, including construction
delays and unanticipated cost overruns, state and federal regulatory
and legislative decisions and actions, the risk that the Company and
its subsidiaries 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 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.
PNM Resources, Inc.
Schedule 1: 1st Quarter 2007 Reconciliation of Ongoing Earnings to
GAAP Earnings
(Preliminary and Unaudited)
Quarter Ended March 31,
2007 2006
------------------ ------------------
Earnings Diluted Earnings Diluted
(in 000s) EPS (in 000s) EPS
--------- -------- --------- --------
Net Earnings Available to Common
Shareholders $29,969 $0.38 $26,325 $0.38
Adjustments for Acquisition-
Related Charges (net of income
tax effects):
Acquisition Integration Costs -- -- 569 0.01
JV Formation Costs 742 0.01 -- --
--------- -------- --------- --------
Total Adjustments 742 0.01 569 0.01
--------- -------- --------- --------
Net Ongoing Earnings Available
to Common Shareholders $30,711 $0.39 $26,894 $0.39
========= ======== ========= ========
Average Diluted Shares 78,099 69,375
All adjustments are included in the Corporate/Other segment
PNM RESOURCES, INC. AND SUBSIDIARIES
PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
March 31,
---------------------------
2007 2006
------------- -------------
(In thousands,
except share information)
Operating Revenues:
Electric $436,807 $448,216
Gas 216,484 207,476
Other 210 109
------------- -------------
Total operating revenues 653,501 655,801
------------- -------------
Operating Expenses:
Cost of energy sold 378,521 425,972
Administrative and general 71,205 65,305
Energy production costs 47,500 37,587
Depreciation and amortization 40,442 34,330
Transmission and distribution costs 22,567 19,050
Taxes, other than income taxes 18,620 16,964
Income taxes 13,969 10,247
------------- -------------
Total operating expenses 592,824 609,455
------------- -------------
Operating income 60,677 46,346
------------- -------------
Other Income and Deductions:
Interest income 10,788 10,151
Gains on investment securities 70 966
Other income 2,012 2,201
Equity in net loss of EnergyCo (662) -
Carrying charges on regulatory assets - 1,973
Other deductions (987) (1,516)
Other income taxes (3,950) (5,101)
------------- -------------
Net other income and deductions 7,271 8,674
------------- -------------
Earnings before interest charges 67,948 55,020
------------- -------------
Interest Charges:
Interest on long-term debt 24,009 22,531
Other interest charges 13,838 6,032
------------- -------------
Total interest charges 37,847 28,563
------------- -------------
Preferred Stock Dividend Requirements of
Subsidiary 132 132
------------- -------------
Net Earnings $29,969 $26,325
============= =============
Net Earnings per Common Share
Basic $0.39 $0.38
============= =============
Diluted $0.38 $0.38
============= =============
Dividends Declared per Common Share $0.23 $0.22
============= =============
The following table shows PNM Electric revenues by customer class,
including intersegment revenues that are eliminated within the
presentation of the preliminary condensed consolidated statements of
earnings, and average number of customers:
Three Months Ended
March 31,
-----------------------
2007 2006 Variance
----------- ----------- ----------
(In thousands, except customers)
Residential $67,797 $55,328 $12,469
Commercial 64,707 57,079 7,628
Industrial 23,450 14,741 8,709
Transmission 8,866 7,045 1,821
Other 5,293 4,585 708
----------- ----------- ----------
$170,113 $138,778 $31,335
=========== =========== ==========
Average customers 487,001 425,919 61,082
=========== =========== ==========
The following table shows PNM Electric MWh sales by customer class:
Three Months Ended
March 31,
-----------------------
2007 2006 Variance
----------- ----------- ----------
(Megawatt hours)
Residential 820,630 688,472 132,158
Commercial 876,954 803,700 73,254
Industrial 470,277 314,008 156,269
Other 56,367 54,863 1,504
----------- ----------- ----------
2,224,228 1,861,043 363,185
=========== =========== ==========
The following table shows TNMP Electric revenues by customer class,
including intersegment revenues that are eliminated within the
presentation of the preliminary condensed consolidated statements of
earnings, and average number of customers:
Three Months Ended
March 31,
-----------------------
2007 2006(1) Variance
----------- ----------- ----------
(In thousands, except customers)
Residential $14,760 $19,271 $(4,511)
Commercial 15,969 20,599 (4,630)
Industrial 1,744 13,319 (11,575)
Other 8,455 9,496 (1,041)
----------- ----------- ----------
$40,928 $62,685 $(21,757)
=========== =========== ==========
Average customers(2) 225,380 271,103 (45,723)
=========== =========== ==========
(1) The customer class revenues presented above for the three months
ended March 31, 2006 have been reclassified from prior year
presentation in order to be consistent with current year
presentation, as a result of changes in customer classifications.
Additionally, the average customer count presented above for the
three months ended March 31, 2006 has been reclassified from prior
year presentation in order to be consistent with the current year
presentation for the Electric Service Identifier (ESI ID) customer
count methodology used by the Electric Reliability Council of Texas
(ERCOT).
(2) Under the Texas Electric Choice Act (TECA), customers of TNMP
Electric in Texas have the ability to choose First Choice or any
other Retail Electric Provider (REP) to provide energy. The average
customers reported above include 135,707 and 149,014 customers of
TNMP Electric at March 31, 2007 and 2006, respectively, who have
chosen First Choice as their REP. These TNMP Electric customers are
also included below in the First Choice segment. For PNMR
consolidated reporting purposes, these customers are included only
once in the consolidated customer count.
The following table shows TNMP Electric MWh sales by customer class:
Three Months Ended
March 31,
-----------------------
2007 2006 (2) Variance
----------- ----------- ----------
(Megawatt hours(1))
Residential 538,462 527,880 10,582
Commercial 459,149 480,586 (21,437)
Industrial 407,345 556,056 (148,711)
Other 24,122 28,959 (4,837)
----------- ----------- ----------
1,429,078 1,593,481 (164,403)
=========== =========== ==========
(1) The MWh sales reported above include 473,014 and 474,841 MWh used
by customers of TNMP Electric at March 31, 2007 and 2006,
respectively, who have chosen First Choice as their REP. These MWh
are also included below in the First Choice segment.
(2) The customer class sales presented above for the three months
ended March 31, 2006 have been reclassified from prior year
presentation in order to be consistent with current year
presentation, as a result of changes in customer classifications.
The following table shows PNM Gas revenues by customer class,
including intersegment revenues that are eliminated within the
presentation of the preliminary condensed consolidated statements of
earnings, and average number of customers:
Three Months Ended
March 31,
-----------------------
2007 2006 Variance
----------- ----------- ----------
(In thousands, except customers)
Residential $152,331 $141,637 $10,694
Commercial 45,186 44,021 1,165
Industrial 583 737 (154)
Transportation(1) 5,014 4,659 355
Other 13,418 16,471 (3,053)
----------- ----------- ----------
$216,532 $207,525 $9,007
=========== =========== ==========
Average customers 491,995 480,655 11,340
=========== =========== ==========
(1) Customer-owned gas.
The following table shows PNM Gas throughput by customer class:
Three Months Ended
March 31,
-----------------------
2007 2006 Variance
----------- ----------- ----------
(Thousands of Decatherms)
Residential 13,944 11,962 1,982
Commercial 4,634 4,166 468
Industrial 63 72 (9)
Transportation(1) 10,800 11,031 (231)
Other 1,326 1,566 (240)
----------- ----------- ----------
30,767 28,797 1,970
=========== =========== ==========
(1) Customer-owned gas.
The following table shows Wholesale revenues by class of sales
transactions, including intersegment revenues that are eliminated
within the presentation of the preliminary condensed consolidated
statements of earnings:
Three Months Ended
March 31,
-----------------------
2007 2006 Variance
----------- ----------- ----------
(In thousands)
Long-term contracts $75,494 $31,234 $44,260
Short-term sales 59,057 148,254 (89,197)
----------- ----------- ----------
$134,551 $179,488 $(44,937)
=========== =========== ==========
The following table shows Wholesale MWh sales by customer class:
Three Months Ended
March 31,
-----------------------
2007 2006 Variance
----------- ----------- ----------
(Megawatt hours)
Long-term contracts 1,162,214 578,544 583,670
Short-term sales 1,440,366 2,220,752 (780,386)
----------- ----------- ----------
2,602,580 2,799,296 (196,716)
=========== =========== ==========
The following table shows First Choice electric operating revenues by
customer class, including intersegment revenues that are eliminated
within the presentation of the preliminary condensed consolidated
statements of earnings, and number of customers:
Three Months Ended
March 31,
-----------------------
2007 2006(1) Variance
----------- ----------- ----------
(In thousands, except customers)
Residential $85,552 $59,601 $25,951
Mass-market 16,169 18,821 (2,652)
Mid-market 30,557 19,447 11,110
Trading(4) 1,134 1,836 (702)
Other 2,153 5,377 (3,224)
----------- ----------- ----------
$135,565 $105,082 $30,483
=========== =========== ==========
Actual customers (2,3) 256,931 219,071 37,860
=========== =========== ==========
(1) The customer class revenues presented above for the three months
ended March 31, 2006 have been reclassified from prior year
presentation in order to be consistent with current year
presentation, as a result of changes in customer classifications.
Additionally, the average customer count presented above for the
three months ended March 31, 2006 have been reclassified from prior
year presentation in order to be consistent with the current year
presentation for the ESI ID customer count methodology used by the
ERCOT.
(2) See note above in the TNMP Electric segment discussion about the
impact of TECA.
(3) Due to the competitive nature of First Choice's business, actual
customer count at March 31 is presented in the table above as a more
representative business indicator than the average customers that are
shown in the table for TNMP customers. First Choice had 256,465
average customers and 220,525 average customers for the three months
ended March 31, 2007 and 2006, respectively. The 220,525 average
customers for the three months ended March 31, 2006 have been
reclassified from prior year presentation in order to be consistent
with the current year presentation for the ESI ID customer count
methodology used by the ERCOT.
(4) Includes gas trading
The following table shows First Choice MWh electric sales by customer
class:
Three Months Ended
March 31,
-----------------------
2007 2006(2) Variance
----------- ----------- ----------
(Megawatt hours(1))
Residential 614,908 427,544 187,364
Mass-market 99,866 121,027 (21,161)
Mid-market 259,876 177,643 82,233
Other 9,279 13,005 (3,726)
----------- ----------- ----------
983,929 739,219 244,710
=========== =========== ==========
(1) See note above in the TNMP Electric segment discussion about the
impact of TECA.
(2) The customer class sales presented above for the three months
ended March 31, 2006 have been reclassified from prior year
presentation in order to be consistent with current year
presentation, as a result of changes in customer classifications.
Source: PNM Resources