ALBUQUERQUE, N.M.--(BUSINESS WIRE)--
PNM Resources (NYSE:PNM) today reported preliminary, unaudited
2007 consolidated ongoing earnings per diluted share of $1.08,
compared with $1.78 per diluted share in 2006. The company also
reported unaudited 2007 consolidated GAAP earnings per diluted share
of $0.98, compared with $1.71 in 2006.
"Our track record of providing strong total shareholder returns
did not extend through to 2007," said Jeff Sterba, PNM Resources
chairman, president and CEO. "This is mainly due to rates in our New
Mexico utility being well below the cost of providing service and
absence of a fuel-adjustment clause, which would allow the recovery of
substantially higher fuel and purchase power costs caused by rising
fuel prices, increased loads and variability in base load generation
availability. Clearly, our pending electric rate case in New Mexico is
a crucial component of our efforts to restore the company's healthy
financial performance."
In 2007, the PNM electric business earned an estimated 5.0 percent
regulated return, based on a rate base of $1.4 billion and capital
structure of 51.4 percent common equity.
"In addition, our competitive retail business, First Choice Power,
had reduced earnings this year compared with an exceptional 2006,"
Sterba said. "Earnings were lower because of the general uncertainty
in the Texas market as numerous legislative issues were debated, the
expiration of price-to-beat rates and the delayed transition to a new
customer care system that impeded customer acquisition."
Ongoing earnings exclude the impact of non-recurring items and net
unrealized mark-to-market gains and losses on economic hedges, as
shown in attached Schedules 1 through 5. Earnings from discontinued
operations also are included in ongoing earnings. Reconciliations of
quarterly and year-end ongoing earnings to GAAP earnings for 2007 and
2006 are provided on accompanying Schedules 1 through 5.
Due to the pending sale of the PNM gas business, the company is
reporting this segment as discontinued operations, which is required
under GAAP. Certain corporate items that historically were allocated
to the PNM Gas segment cannot be included as discontinued operations
and were reassigned to PNM Electric, as discussed further in segment
reporting. In addition, the company previously announced the pending
sale of certain wholesale power, natural gas and transmission
contracts as the first step of separating its unregulated electric
activities from PNM the utility. Effective December 31, 2007,
management changed the methodology it uses to operate and assess its
business activities and no longer reports a separate Wholesale
segment.
As previously announced, the Luna Energy Facility and Lordsburg
Generating Station will be separated from PNM the utility by Jan. 1,
2010, as required by the New Mexico Public Regulation Commission.
Those assets could be sold, moved to a different subsidiary or
included in future retail rates if approved by regulators. Because the
company's share of Unit 3 at the Palo Verde Nuclear Generating Station
is excluded from the regulatory separation requirement, it can remain
within PNM the utility and its power can continue to be sold on the
wholesale market. Gross margin from these unregulated power plants is
reported in the PNM Electric segment.
2007 FOURTH QUARTER CONSOLIDATED PERFORMANCE SUMMARY
Ongoing earnings were $8.8 million, or $0.11 per diluted share,
compared with $36.7 million, or $0.50 per diluted share, in 2006. GAAP
earnings were $18.1 million, or $0.23 per diluted share, compared with
$35.3 million, or $0.48 per diluted share.
Lower power plant availability reduced quarterly earnings per
diluted share by $0.18, compared with the same period in 2006. All
three of the company's base load power facilities fell short of
equivalent availability factors needed to reach the previously stated
earnings per share target range. The San Juan Generating Station had a
quarterly EAF of 61.2 percent, well below the company's target of 85.0
percent. Improved availability of the plant is expected as major
overhauls of two units will be completed within the next 15 months.
Palo Verde had an EAF of 55.8 percent, also below PNM Resources'
target of 80.0 percent. Palo Verde has concluded its final complex
steam generator replacement outage and focus will turn to
implementation of the plant's improvement program. In December,
outages reduced the Four Corners Plant's quarterly EAF to 89.6
percent, which was short of its planned 92.0 percent level.
Reduced plant performance resulted in increased power purchase
costs and reduced wholesale opportunities. In addition, mild New
Mexico temperatures in October and early November resulted in 10
percent fewer heating-degree days in PNM's gas service territory.
YEAR-END CONSOLIDATED PERFORMANCE SUMMARY
For the year, ongoing earnings totaled $84.2 million, or $1.08 per
diluted share, compared with $125.4 million, or $1.78 per diluted
share, in 2006. GAAP earnings for the year totaled $76.3 million, or
$0.98 per diluted share, compared with $120.8 million, or $1.71 per
diluted share, in 2006.
Following three consecutive years of record performance, plant
availability at San Juan was reduced and finished the year with an EAF
of 80.4 percent, compared with 89.6 percent in 2006. Palo Verde had
improved performance for the year with an EAF of 77.3 percent,
compared with 70.0 percent in 2006. Four Corners also had reduced
availability of 78.5 percent, compared with 90.5 percent in 2006.
Overall, plant availability reduced PNM Resources consolidated
earnings per diluted share by $0.11 in 2007, compared with 2006.
Reduced wholesale opportunities for PNM electric operations and
increased costs to serve retail customers, including higher coal and
purchase power costs, negatively impacted diluted earnings per share
an additional $0.11, comparing 2007 with 2006. A 10.3 percent increase
in average number of common shares outstanding reduced diluted
earnings per share by $0.17, comparing 2007 with 2006.
Regarding its unregulated electric operations, First Choice Power
average retail margins were reduced as the Texas market eliminated
price-to-beat rates in January 2007 and all customers shifted to
competitive pricing. Trading margins for First Choice resulted in
losses in 2007, following a strong year in 2006.
YEAR-END SEGMENT REPORTING OF EARNINGS
PNM Electric - a vertically integrated electric utility in New
Mexico with distribution, transmission and generation assets. This
segment includes certain wholesale activities that were previously
shown as a separate segment.
-- Ongoing earnings were $34.5 million, or $0.45 per diluted
share, compared with $57.4 million, or $0.81 per diluted
share, in 2006.
-- PNM Electric reported 2007 GAAP earnings of $23.3 million, or
$0.30 per diluted share, compared with $57.6 million, or $0.81
per diluted share, in 2006. Certain corporate items that
historically were allocated to the PNM Gas segment cannot be
included as discontinued operations under GAAP. Therefore,
those charges totaling $6.4 million and $6.3 million after tax
have been reallocated to PNM Electric in reported results for
2007 and 2006, respectively, as shown in Schedules 2 and 4.
-- Less availability at base load coal plants, reduced wholesale
activity and increased costs to serve jurisdictional load more
than offset the benefits of the transfer of TNMP-New Mexico
operations to PNM and weather-normalized load growth of 1.9
percent. Increased interest expense, higher coal costs and
additional shares outstanding also lowered earnings per share.
-- Gross margin associated with the company's unregulated power
plants - Palo Verde Unit 3, the Luna Energy Facility and the
Lordsburg Generating Station - was $42.1 million in 2007,
compared with $53.8 million in 2006, based on an average price
of short-term power sales.
-- The PNM electric business earned an estimated 5.0 percent
regulated return, based on a rate base of $1.4 billion and
capital structure of 51.4 percent common equity.
TNMP - a transmission and distribution company in Texas.
-- TNMP reported ongoing earnings of $18.9 million, or $0.24 per
diluted share. GAAP earnings were $18.4 million, or $0.23 per
diluted share. In 2006, TNMP reported ongoing earnings and
GAAP earnings of $15.7 million, or $0.22 per diluted share.
-- The collection of the competitive transition charge, colder
weather and reduced financing costs more than offset the
impacts of the transfer of New Mexico operations to PNM and
additional shares outstanding.
-- TNMP earned an estimated 6.7 percent regulated return, based
on a rate base of $0.4 billion and capital structure of 40.0
percent common equity.
First Choice Power - a competitive retail electric provider in
Texas.
-- First Choice Power reported ongoing earnings of $26.8 million,
or $0.34 per diluted share, compared with $41.4 million, or
$0.59 per diluted share in 2006.
-- GAAP earnings were $27.2 million, or $0.35 per diluted share,
compared with $40.0 million, or $0.57 per diluted share, in
2006.
-- Average retail margin per megawatt-hour decreased to $23.47
from $28.61 in 2006. The decrease mainly was caused by the
shift from price-to-beat rates to competitive pricing.
-- Trading margins reflect losses of $3.6 million, compared with
gains of $9.3 million in 2006. The losses were driven mainly
by a decrease in value of market positions caused by lower
market heat rates and lower natural gas prices.
Altura Energy - an entity that acquired the Twin Oaks Power
facility in April 2006. On June 1, 2007, PNM Resources contributed
Altura to the EnergyCo joint venture at fair-market value of
approximately $550 million after working capital adjustments. At the
time of the contribution, PNM Resources received a cash distribution
equal to 50 percent of Altura's fair market value, or approximately
$275 million.
-- Altura reported 2007 ongoing earnings of $7.3 million, or
$0.09 per diluted share. GAAP earnings were $5.2 million, of
$0.06 per diluted share. Altura reported ongoing and GAAP
earnings of $23.9 million, or $0.34 per diluted share in 2006.
-- Altura's 2006 results include approximately nine months of
earnings associated with the Twin Oaks Power facility after
its April acquisition, including allocations of corporate
costs and interest expense associated with the $480 million
bridge loan undertaken to fund the purchase of the plant.
Altura's 2007 results were significantly lower than 2006, as
only five months of 100 percent earnings associated with the
Twin Oaks Power facility are included prior to its
contribution to the EnergyCo joint venture. The results from
the five months of full ownership in 2007 also include
allocations of corporate costs and interest expense associated
with the $249.5 million remaining on the bridge loan after its
balance was reduced with the proceeds from a December 2006
stock issuance.
-- During the approximately nine months of Altura ownership in
2006, the Twin Oaks Power facility had an EAF of 88.0 percent,
compared with 84.2 percent during the five months fully owned
by Altura in 2007, further resulting in reduced earnings.
EnergyCo - a business segment that is comprised of the joint
venture between PNM Resources and a subsidiary of Cascade Investment,
L.L.C. EnergyCo owns two generating assets, Twin Oaks and Altura
Cogen, a natural gas facility acquired on Aug. 1, 2007.
-- EnergyCo contributed $4.6 million, or $0.06 per diluted share,
to consolidated GAAP and ongoing earnings in 2007.
-- Before service company charges and interest expense, EnergyCo
earnings contributed $0.16 per diluted share to PNM Resources.
Strong plant performance was one component of the earnings
contribution as the Twin Oaks Power facility had an EAF of
89.8 percent and the Altura Cogen facility produced a 94.4
percent availability. Service company charges, which include
start-up costs associated with the joint venture, and interest
expense reduced this contribution to PNM Resources by $0.10
per diluted share.
Corporate/Other - a business segment that reflects costs at the
PNM Resources holding company, comprised mainly of interest expense
related to certain short-term debt and existing equity-linked
securities.
-- Corporate/Other reported ongoing losses of $24.3 million, or
$0.31 per diluted share, compared with losses of $25.8
million, or $0.36 per diluted share, in 2006.
-- GAAP losses were $17.8 million, or $0.22 per diluted share,
compared with losses of $29.2 million, or $0.41 per diluted
share, in 2006. Losses in 2007 were lower than 2006 as a
result of non-recurring items, as shown in Schedules 2 through
5.
Discontinued Operations
PNM Gas - a natural gas utility with distribution and transmission
assets.
-- PNM Gas reported 2007 ongoing earnings of $16.4 million, or
$0.21 per diluted share. GAAP earnings were $15.5 million, or
$0.20 per diluted share. PNM Gas reported ongoing and GAAP
earnings of $12.9 million, or $0.18 per diluted share, in
2006.
-- Certain corporate items that historically were allocated to
the PNM Gas segment cannot be included as discontinued
operations under GAAP. Therefore, those charges totaling $6.4
million and $6.3 million after tax have been reallocated to
PNM Electric in reported results for 2007 and 2006,
respectively, as shown in Schedules 2 and 4.
-- Colder weather, mainly during the first quarter, customer
growth of 1.9 percent and the implementation of new delivery
rates more than offset the impact of dilution.
-- The PNM gas operations earned an estimated 5.2 percent
regulated return, based on a rate base of $0.4 billion and
capital structure of 51.8 percent common equity.
2007 EARNINGS CALL: 8:30 A.M. EST, MONDAY, FEB. 11PNM Resources will discuss preliminary, unaudited 2007 earnings
results and guidance for 2008 and 2009 during a live conference call
and Web cast at 8:30 a.m. EST on Monday, Feb. 11. Speaking on the call
will be Jeff Sterba, PNM Resources chairman, president and CEO, Chuck
Eldred, executive vice president and CFO, Pat Vincent, president of
utilities, and John R. Loyack, EnergyCo CEO.
Investors, analysts and other participants can listen to the live
conference call by dialing (877) 548-7903 (toll free) or (719)
325-4931 (toll) five to 10 minutes prior to the event and referencing
"the PNM Resources 2007 earnings conference call." A telephone replay
will be available at 1:30 p.m. EST until midnightFeb. 18 by dialing
(888) 203-1112 (toll free) or (719) 457-0820 and using confirmation
code 4045459.
A live Web cast of the call will be available at
http://www.pnmresources.com/investors/events.cfm. Listeners are
encouraged to visit the Web site at least 30 minutes before the event
to register, download and install any necessary audio software. A
recording of the Web cast will be available for 30 days and a
transcript of the call will be posted as soon as possible.
Background:
PNM Resources (NYSE:PNM) is an energy holding company based in
Albuquerque, N.M., with 2007 consolidated operating revenues from
continuing and discontinued operations of $2.4 billion. Through its
utility and energy subsidiaries, PNM Resources serves electricity to
approximately 835,000 homes and businesses in New Mexico and Texas and
natural gas to nearly 492,000 customers in New Mexico. Its utility
subsidiaries are PNM and Texas-New Mexico Power. Another subsidiary is
First Choice Power, a deregulated competitive retail electric provider
in Texas. With generation resources of more than 2,650 megawatts, PNM
Resources and its subsidiaries market power throughout the Southwest,
Texas and the West. In addition, the joint venture in which the
company has a 50-percent ownership owns approximately 920 megawatts of
generation. For more information, visit www.PNMResources.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
Statements made in this news 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 EnergyCo LLC ("EnergyCo") is unable to identify and
implement profitable acquisitions, including development of the Cedar
Bayou Generating Station, or that the Company and ECJV Holdings,
L.L.C. will not agree to make additional capital contributions to
EnergyCo, the potential unavailability of cash from the Company's
subsidiaries or EnergyCo due to regulatory, statutory or 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, including actions by the
ratings agencies affecting the Company's credit ratings, or EnergyCo's
access to additional debt financing following the utilization of its
existing credit facility, 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 the Palo Verde Nuclear Generating Station, the San
Juan Generating Station, the Four Corners Plant, and EnergyCo
generating units, and transmission systems, the ability to secure
long-term power sales, the risk that the Company and its subsidiaries
and EnergyCo 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 risks associated with
completion of generation, including pollution control equipment at the
San Juan Generating Station, and the EnergyCo Cedar Bayou Generating
Station, transmission, distribution and other projects, including
construction delays and unanticipated cost overruns, state and federal
regulatory and legislative decisions and actions, including PNM's
pending electric rate case, the outcome of legal proceedings,
including PNM's pending gas rate case appeal, changes in applicable
accounting principles, the performance of state, regional and national
economies, and the risk that the closings of the pending sales of the
PNM natural gas utility and certain wholesale electricity, natural gas
and transmission contracts, and the pending purchase of certain
Continental Energy Systems subsidiaries may not occur due to
regulatory or other reasons. 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.
Non-GAAP Financial Measures
PNM Resources ("the Company") uses ongoing earnings and ongoing
earnings per diluted share (or ongoing diluted earnings per share) to
evaluate the operations of the Company and to establish goals for
management and employees. Additionally, the Company uses a return on
rate base ("regulated return") to evaluate the operations of each of
its regulated business segments. While the Company believes these
financial measures are appropriate and useful for investors, they are
not measures presented in accordance with generally accepted
accounting principles in the U.S. (GAAP). The Company does not intend
for these measures, or any piece of these measures, to represent any
financial measure as defined by GAAP. Furthermore, the Company's
calculations of these measures as presented may or may not be
comparable to similarly titled measures used by other companies.
As defined within this release, ongoing earnings and ongoing
earnings per diluted share exclude the impact of non-recurring items
and net unrealized mark-to-market gains and losses on economic hedges.
Reconciliations of quarterly and year-end ongoing earnings to GAAP
earnings for 2007 and 2006 are provided on accompanying Schedules 1
through 5.
Regulated return measures the regulated earnings contribution of a
business segment as a percentage of the portion of its rate base
deemed financed by common equity. Regulated return is calculated by
dividing ongoing earnings for the regulated portion of the business
segment, as adjusted, by the common equity portion of its estimated
rate base, based on a defined capital structure. PNM Resources
believes rate base to be a measure that is required by the New Mexico
Public Regulation Commission (NMPRC) and the Public Utility Commission
of Texas (PUCT), and does not believe rate base to be comparable to a
GAAP measure. The calculation of regulated return for the Company's
regulated business segments, along with a calculation of adjusted
ongoing earnings, are presented on the accompanying Schedule 6.
PNM Resources, Inc.
Schedule 1:
4th Quarter 2007 Reconciliation of Ongoing Earnings to GAAP Earnings
(Preliminary and Unaudited)
(in '000s) Quarter Ended December 31,
-------------------------------------
2007 2006
------------------ ------------------
Earnings EPS Earnings EPS
(in '000s) Diluted (in '000s) Diluted
------------------ ------------------
GAAP Net Earnings $18,069 $ 0.23 $35,313 $ 0.48
Adjustments to reconcile GAAP
net earnings to ongoing net
earnings (net of income tax
effects):
Favorable Tax Decisions (4,708) (0.06) - -
Acquisition Integration Costs - - 423 0.00
Loss on Contribution of Altura 380 0.00 - -
Business Improvement Plan 1,475 0.02 - -
Sale of Turbine (955) (0.01) - -
JV Formation Costs (942) (0.01) 2,079 0.03
Economic mark-to-market (4,501) (0.06) (1,086) (0.01)
---------- ------- ---------- -------
Total Adjustments (9,251) (0.12) 1,416 0.02
---------- ------- ---------- -------
Ongoing Net Earnings $ 8,818 $ 0.11 $36,729 $ 0.50
========== ======= ========== =======
Average Diluted Shares 77,257 73,263
PNM Resources
Schedule 2:
2007 Reconciliation of Ongoing to GAAP Earnings
($ in thousands)
(Preliminary and Unaudited)
PNM
2007 Earnings PNM Gas Electric Wholesale TNMP FCP
-----------------------------------------------------
PNM
Wholesale Altura
-----------------------------------------------------
Ongoing Earnings
- Previous
Segments $10,092 $ 35,833 $ 4,173 $7,259 $18,923 $26,843
-----------------------------------------------------
Electric Segment
Changes
Combine PNM
Electric
(Retail) and
PNM Wholesale 4,173 (4,173)
Reclass PNM
Corporate/Other (98) 879
---------------- -----------------------------------------------------
After Electric
Segment Changes 9,994 40,885 0 7,259 18,923 26,843
2007 Earnings EnergyCo Corp/Other PNMR
----------------------------------------
PNM PNMR
Corp/Other Corp/Other
----------------------------------------
Ongoing Earnings - Previous
Segments $ 4,579 $ 781 $ (24,278) $84,205
----------------------------------------
Electric Segment Changes
Combine PNM Electric (Retail)
and PNM Wholesale 0
Reclass PNM Corporate/Other (781) 0
----------------------------- ----------------------------------------
After Electric Segment
Changes 4,579 0 (24,278) 84,205
PNM
PNM Gas Electric Altura TNMP FCP EnergyCo
------------------------------------------------------
9,994 40,885 7,259 18,923 26,843 4,579
Corporate items
allocated to
PNM Gas that
are not
considered
discontinued
operations
under GAAP: 6,362 (6,362) 0 0 0 0
Ongoing
Earnings 16,356 34,523 7,259 18,923 26,843 4,579
------------------------------------------------------
Non-Recurring
Items
Favorable Tax
Decisions 4,709
Twin Oaks III
Impairment (2,042)
Business
Improvement
Plan (859) (2,277) (524)
Loss on Altura
Contribution
Sale of Turbine 2,633
Afton Write-
Down (11,780)
JV Formation
Costs
Economic Mark-
to-Market 1 (4,504) 341
--------------- ------------------------------------------------------
Total Non-
Recurring
Items (858) (11,219) (2,042) (524) 341 0
GAAP Earnings
from
Continuing
Operations 23,304 5,217 18,399 27,184 4,579
GAAP Earnings
from
Discontinued
Operations 15,498
--------------- ------------------------------------------------------
GAAP Net
Earnings $15,498 $ 23,304 $ 5,217 $18,399 $27,184 $ 4,579
======================================================
PNM PNMR
Corp/Other Corp/Other PNMR
---------------------------------
0 (24,278) 84,205
Corporate items allocated to PNM Gas
that are not considered
discontinued operations under GAAP: 0 0 0
Ongoing Earnings 0 (24,278) 84,205
---------------------------------
Non-Recurring Items
Favorable Tax Decisions 16,037 20,746
Twin Oaks III Impairment (2,042)
Business Improvement Plan (5,417) (9,077)
Loss on Altura Contribution (2,577) (2,577)
Sale of Turbine 2,633
Afton Write-Down (11,780)
JV Formation Costs (1,600) (1,600)
Economic Mark-to-Market (4,162)
------------------------------------ ---------------------------------
Total Non-Recurring Items 6,443 (7,859)
GAAP Earnings from Continuing
Operations (17,835) 60,848
GAAP Earnings from Discontinued
Operations 15,498
------------------------------------ ---------------------------------
GAAP Net Earnings $ (17,835) $ 76,346
=================================
PNM Resources
Schedule 3:
2007 Reconciliation of GAAP to Ongoing Earnings Per Share
(Preliminary and Unaudited)
PNM
2007 EPS PNM Gas Electric Wholesale TNMP FCP
------------------------------------------------
PNM
Wholesale Altura
------------------------------------------------
Ongoing Earnings -
Previous Segments $ 0.13 $ 0.47 $ 0.05 $ 0.09 $0.24 $0.34
------------------------------------------------
Electric Segment
Changes
Combine PNM Electric
(Retail) and PNM
Wholesale 0.05 (0.05)
Reclass PNM
Corporate/Other (0.00) 0.01
--------------------- ------------------------------------------------
After Electric
Segment Changes 0.13 0.53 0.00 0.09 0.24 0.34
2007 EPS EnergyCo Corp/Other PNMR
--------------------------------------
PNM PNMR
Corp/Other Corp/Other
--------------------------------------
Ongoing Earnings - Previous
Segments $ 0.06 $ 0.01 $ (0.31) $1.08
--------------------------------------
Electric Segment Changes
Combine PNM Electric (Retail)
and PNM Wholesale 0.00
Reclass PNM Corporate/Other (0.01) 0.00
------------------------------- --------------------------------------
After Electric Segment Changes 0.06 0.00 (0.31) 1.08
PNM Gas PNM Altura TNMP FCP EnergyCo
Electric
-------------------------------------------------
0.13 0.53 0.09 0.24 0.34 0.06
Corporate items
allocated to PNM
Gas that are not
considered
discontinued
operations under
GAAP: 0.08 (0.08) 0.00 0.00 0.00 0.00
Ongoing Earnings 0.21 0.45 0.09 0.24 0.34 0.06
-------------------------------------------------
Non-Recurring Items
Favorable Tax
Decisions 0.06
Twin Oaks III
Impairment (0.03)
Business Improvement
Plan (0.01) (0.03) (0.01)
Loss on Altura
Contribution
Sale of Turbine 0.03
Afton Write-Down (0.15)
JV Formation Costs
Economic Mark-to-
Market (0.06) 0.01
-------------------- -------------------------------------------------
Total Non-Recurring
Items (0.01) (0.15) (0.03) (0.01) 0.01 0.00
GAAP Earnings from
Continuing
Operations 0.30 0.06 0.23 0.35 0.06
GAAP Earnings from
Discontinued
Operations 0.20
-------------------- -------------------------------------------------
GAAP Net Earnings $ 0.20 $ 0.30 $ 0.06 $ 0.23 $0.35 $ 0.06
=================================================
PNM PNMR PNMR
Corp/Other Corp/Other
-------------------------------
(0.31) 1.08
Corporate items allocated to PNM Gas
that are not considered discontinued
operations under GAAP: 0.00 0.00
Ongoing Earnings (0.31) 1.08
-------------------------------
Non-Recurring Items
Favorable Tax Decisions 0.21 0.27
Twin Oaks III Impairment (0.03)
Business Improvement Plan (0.07) (0.12)
Loss on Altura Contribution (0.03) (0.03)
Sale of Turbine 0.03
Afton Write-Down (0.15)
JV Formation Costs (0.02) (0.02)
Economic Mark-to-Market (0.05)
-------------------------------------- -------------------------------
Total Non-Recurring Items 0.09 (0.10)
GAAP Earnings from Continuing
Operations (0.22) 0.78
GAAP Earnings from Discontinued
Operations 0.20
-------------------------------------- -------------------------------
GAAP Net Earnings $ (0.22) $ 0.98
===============================
Average Diluted Shares Outstanding: 77,927,851
PNM Resources
Schedule 4:
2006 Reconciliation of GAAP to Ongoing Earnings
($ in thousands)
(Preliminary and Unaudited)
PNM PNM
2006 Earnings Gas Electric Wholesale TNMP FCP
----------------------------------------------------
PNM
Wholesale Altura
----------------------------------------------------
Ongoing Earnings
- Previous
Segments $5,956 $ 38,981 $ 19,371 $23,909 $15,713 $41,363
----------------------------------------------------
Electric Segment
Changes
Combine PNM
Electric
(Retail) and PNM
Wholesale 19,371 (19,371)
Reclass PNM
Corporate/Other 569 5,389
----------------- ----------------------------------------------------
After Electric
Segment Changes 6,525 63,741 0 23,909 15,713 41,363
2006 Earnings EnergyCo Corp/Other PNMR
-----------------------------------------
PNM PNMR
Corp/Other Corp/Other
-----------------------------------------
Ongoing Earnings - Previous
Segments $ 0 $ 5,958 $ (25,825) $125,426
-----------------------------------------
Electric Segment Changes
Combine PNM Electric
(Retail) and PNM Wholesale 0
Reclass PNM Corporate/Other (5,958) 0
---------------------------- -----------------------------------------
After Electric Segment
Changes 0 0 (25,825) 125,426
PNM Gas PNM Altura TNMP FCP EnergyCo
Electric
------------------------------------------------------
6,525 62,996 23,909 15,713 41,363 0
Corporate items
allocated to
PNM Gas that
are not
considered
discontinued
operations
under GAAP: 6,337 (6,337) 0 0 0 0
Ongoing
Earnings 12,862 57,404 23,909 15,713 41,363 0
------------------------------------------------------
Non-Recurring
Items
Acquisition
Integration
Costs (4) (10) (14) (1,396)
JV Formation
Costs
Economic Mark-
to-Market 171
--------------- ------------------------------------------------------
Total Non-
Recurring
Items (4) 161 0 (14) (1,396) 0
GAAP Earnings
from
Continuing
Operations 57,565 23,909 15,699 39,967 0
GAAP Earnings
from
Discontinued
Operations 12,858
--------------- ------------------------------------------------------
GAAP Net
Earnings $12,858 $ 57,565 $23,909 $15,699 $39,967 $ 0
======================================================
PNMR PNMR
Corp/Other
---------------------
(25,825) 125,426
Corporate items allocated to PNM Gas that are
not considered discontinued operations under
GAAP: 0 0
Ongoing Earnings (25,825) 125,426
---------------------
Non-Recurring Items
Acquisition Integration Costs (1,276) (2,700)
JV Formation Costs (2,079) (2,079)
Economic Mark-to-Market 171
------------------------------------------------ ---------------------
Total Non-Recurring Items (3,355) (4,608)
GAAP Earnings from Continuing Operations (29,180) 107,960
GAAP Earnings from Discontinued Operations 12,858
------------------------------------------------ ---------------------
GAAP Net Earnings $ (29,180) $120,818
=====================
PNM Resources
Schedule 5:
2006 Reconciliation of GAAP to Ongoing Earnings Per Share
(Preliminary and Unaudited)
PNM PNM
2006 EPS Gas Electric Wholesale TNMP FCP
----------------------------------------------
PNM
Wholesale Altura
----------------------------------------------
Ongoing Earnings -
Previous Segments $0.08 $ 0.55 $ 0.28 $ 0.34 $0.22 $0.59
----------------------------------------------
Electric Segment
Changes
Combine PNM Electric
(Retail) and PNM
Wholesale 0.28 (0.28)
Reclass PNM
Corporate/Other 0.01 0.07
----------------------- ----------------------------------------------
After Electric Segment
Changes 0.09 0.90 0.00 0.34 0.22 0.59
2006 EPS EnergyCo Corp/Other PNMR
--------------------------------------
PNM PNMR
Corp/Other Corp/Other
--------------------------------------
Ongoing Earnings - Previous
Segments $ 0.00 $ 0.08 $ (0.36) $1.78
--------------------------------------
Electric Segment Changes
Combine PNM Electric (Retail)
and PNM Wholesale 0.00
Reclass PNM Corporate/Other (0.08) 0.00
------------------------------- --------------------------------------
After Electric Segment Changes 0.00 0.00 (0.36) 1.78
PNM PNM
Gas Electric Altura TNMP FCP EnergyCo
----------------------------------------------
0.09 0.90 0.34 0.22 0.59 0.00
Corporate items
allocated to PNM Gas
that are not
considered
discontinued
operations under GAAP: 0.09 (0.09) 0.00 0.00 0.00 0.00
Ongoing Earnings 0.18 0.81 0.34 0.22 0.59 0.00
----------------------------------------------
Non-Recurring Items
Acquisition Integration
Costs (0.02)
JV Formation Costs
Economic Mark-to-Market 0.00
----------------------- ----------------------------------------------
Total Non-Recurring
Items 0.00 0.00 0.00 0.00 (0.02) 0.00
GAAP Earnings from
Continuing Operations 0.81 0.34 0.22 0.57 0.00
GAAP Earnings from
Discontinued
Operations 0.18
----------------------- ----------------------------------------------
GAAP Net Earnings $0.18 $ 0.81 $0.34 $0.22 $ 0.57 $ 0.00
==============================================
PNM PNMR
Corp/Other Corp/Other PNMR
-------------------------------
(0.36) 1.78
Corporate items allocated to PNM Gas
that are not considered discontinued
operations under GAAP: 0.00 0.00
Ongoing Earnings (0.36) 1.78
-------------------------------
Non-Recurring Items
Acquisition Integration Costs (0.02) (0.04)
JV Formation Costs (0.03) (0.03)
Economic Mark-to-Market 0.00
-------------------------------------- -------------------------------
Total Non-Recurring Items (0.05) (0.07)
GAAP Earnings from Continuing
Operations (0.41) 1.53
GAAP Earnings from Discontinued
Operations 0.18
-------------------------------------- -------------------------------
GAAP Net Earnings $ (0.41) $ 1.71
===============================
Average Diluted Shares Outstanding: 70,635,829
PNM Resources
Schedule 6:
2007 Utility Regulated Return
(in millions, except percentages)
FY 2007
PNM Electric
Regulated ongoing earnings (1) $ 35.8
Rate base $1,404.0
Capital structure (common equity percentage) 51.4%
---------
$ 721.2
Regulated return 5.0%
PNM Gas
Regulated ongoing earnings (1) $ 10.1
Rate base $ 377.3
Capital structure (common equity percentage) 51.8%
---------
$ 195.4
Regulated return 5.2%
TNMP Electric
Regulated ongoing earnings (1) $ 18.9
Less recovery of stranded costs, net of
amortization and tax (2) $ (7.9)
---------
Regulated ongoing earnings, as adjusted $ 11.0
Rate base $ 411.5
Capital structure (common equity percentage) 40.0%
---------
$ 164.6
Regulated return 6.7%
(1) Regulated ongoing earnings for PNM Electric, PNM Gas and TNMP
Electric are included on schedule 2, which includes a
reconciliation of these numbers to GAAP segment earnings.
(2) TNMP regulated ongoing earnings are adjusted to remove the amount
of after-tax earnings related to the recovery of stranded costs,
as this amount relates to prior periods and is not reflective of
a current year return on rate base.
PNM RESOURCES, INC. AND SUBSIDIARIES
PRELIMINARY CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------- -----------------------
2007 2006 2007 2006
--------- --------- ----------- -----------
(In thousands, except per share amounts)
Operating Revenues:
Electric $401,249 $455,312 $1,913,063 $1,962,174
Other 496 683 1,205 1,186
--------- --------- ----------- -----------
Total operating revenues 401,745 455,995 1,914,268 1,963,360
--------- --------- ----------- -----------
Operating Expenses:
Cost of energy sold 218,578 228,514 1,121,862 1,084,245
Administrative and
general 48,913 60,160 214,421 218,343
Energy production costs 44,143 44,051 200,421 163,282
Depreciation and
amortization 35,200 34,645 135,695 130,662
Transmission and
distribution costs 13,781 13,981 57,736 54,030
Taxes other than income
taxes 12,439 15,626 57,922 62,965
--------- --------- ----------- -----------
Total operating expenses 373,054 397,977 1,788,057 1,713,527
--------- --------- ----------- -----------
Operating income 28,691 59,018 126,211 249,833
--------- --------- ----------- -----------
Other Income and
Deductions:
Interest income 15,634 9,444 43,154 36,013
Gains on investments held
by NDT 4,701 3,957 11,599 5,844
Other income 1,992 2,054 7,286 6,114
Equity in net earnings
(loss) of EnergyCo (4,585) - 7,581 -
Carrying charges on
regulatory assets - 978 - 6,993
Other deductions (3,032) (1,278) (11,552) (6,671)
--------- --------- ----------- -----------
Net other income and
deductions 14,710 15,155 58,068 48,293
--------- --------- ----------- -----------
Interest Charges:
Interest on long-term
debt 16,946 21,502 75,396 84,773
Other interest charges 9,930 15,768 44,759 49,335
--------- --------- ----------- -----------
Total interest charges 26,876 37,270 120,155 134,108
--------- --------- ----------- -----------
Earnings before Income
Taxes 16,525 36,903 64,124 164,018
Income Taxes 4,235 9,038 2,748 55,530
Preferred Stock Dividend
Requirements of
Subsidiary 132 132 528 528
--------- --------- ----------- -----------
Earnings from Continuing
Operations 12,158 27,733 60,848 107,960
Earnings from Discontinued
Operations, net of income
taxes of $3,899, $4,733,
$10,382 and $8,439 5,911 7,580 15,498 12,858
--------- --------- ----------- -----------
Net Earnings $ 18,069 $ 35,313 $ 76,346 $ 120,818
========= ========= =========== ===========
Earnings from Continuing
Operations per Common
Share:
Basic $ 0.16 $ 0.39 $ 0.79 $ 1.56
Diluted $ 0.16 $ 0.38 $ 0.78 $ 1.54
Net Earnings per Common
Share:
Basic $ 0.24 $ 0.49 $ 1.00 $ 1.73
Diluted $ 0.23 $ 0.48 $ 0.98 $ 1.71
Dividends Declared per
Common Share $ 0.23 $ 0.22 $ 0.92 $ 0.88
PNM RESOURCES, INC. AND SUBSIDIARIES
PRELIMINARY COMPARATIVE OPERATING STATISTICS
The following table shows PNM Electric operating 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:
Year Ended December 31,
----------------------------------
2007 2006 Change %
--------- -------- ---------------
(In millions, except
customers)
Residential $ 265.4 $ 222.1 $ 43.3 19.5
Commercial 294.7 257.7 37.0 14.4
Industrial 100.0 62.5 37.5 60.0
Transmission 34.9 28.9 6.0 20.8
Other retail 23.0 21.0 2.0 9.5
Wholesale long-term sales 157.0 149.7 7.3 4.9
Wholesale short-term sales 262.2 373.6 (111.4) (29.8)
-------- -------- --------
$1,137.2 $1,115.5 $ 21.7 1.9
======== ======== ========
Average customers (thousands) 489.4 430.4 59.2 13.8
======== ======== ========
The following table shows PNM Electric GWh sales by customer
class:
Year Ended December 31,
-------------------------------
2007 2006 Change %
-------- -------- -------------
(Gigawatt hours)
Residential 3,208.6 2,764.3 444.3 16.1
Commercial 4,005.2 3,635.4 369.8 10.2
Industrial 1,920.1 1,327.3 592.8 44.7
Other retail 266.0 258.3 7.7 3.0
Wholesale long-term sales 2,953.3 2,647.7 305.6 11.5
Wholesale short-term sales 7,126.3 7,207.2 (80.9) (1.1)
-------- -------- -------
19,479.5 17,840.2 1,639.3 9.2
======== ======== =======
Effective January 1, 2007, TNMP's New Mexico operations were
transferred to PNM. For 2006, TNMP's New Mexico operations had total
operating revenues of $99.1 million, average customers of 49,529 and
total sales volume of 1,124 GWh.
PNM RESOURCES, INC. AND SUBSIDIARIES
PRELIMINARY COMPARATIVE OPERATING STATISTICS
The following table shows TNMP Electric operating 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:
Year Ended December 31,
-----------------------------
2007 2006(1) Change %
------ ------- --------------
(In millions, except
customers)
Residential $ 69.5 $ 89.5 $(20.0) (22.3)
Commercial 70.1 88.7 (18.6) (21.0)
Industrial 7.9 40.5 (32.6) (80.5)
Other 32.9 38.3 (5.4) (14.1)
------ ------- -------
$180.4 $257.0 $(76.6) (29.8)
====== ======= =======
Average customers (thousands) (2) 226.2 272.6 (46.4) (17.0)
====== ======= =======
(1) The customer class revenues and the average customer count have
been reclassified.
(2) Under TECA, customers of TNMP Electric in Texas have the ability
to choose First Choice or any other REP to provide energy. The
average customers reported above include 137,015 and 153,693
customers of TNMP Electric for the twelve months ended December
31, 2007 and 2006 who have chosen First Choice as their REP.
These customers are also included in the First Choice segment.
The following table shows TNMP Electric GWh sales by customer
class:
Year Ended December 31,
---------------------------------
2007 2006(2) Change %
------- ------- ---------------
(Gigawatt hours(1))
Residential 2,520.6 2,734.4 (213.8) (7.8)
Commercial 2,196.0 2,579.9 (383.9) (14.9)
Industrial 1,927.9 2,157.5 (229.6) (10.6)
Other 100.6 121.2 (20.6) (17.0)
------- ------- -------
6,745.1 7,593.0 (847.9) (11.2)
======= ======= =======
(1) The GWh sales reported above include 2,018.1 and 2,332.1 GWhs for
the twelve months ended December 31, 2007 and 2006 and used by
customers of TNMP Electric respectively, who have chosen First
Choice as their REP. These GWhs are also included below in the
First Choice segment.
(2) The customer class sales have been reclassified.
Effective January 1, 2007, TNMP's New Mexico operations were
transferred to PNM. For 2006, TNMP's New Mexico operations had total
operating revenues, average customers and total sales volume as set
forth under PNM Electric above.
PNM RESOURCES, INC. AND SUBSIDIARIES
PRELIMINARY COMPARATIVE OPERATING STATISTICS
The following table shows PNM Gas operating revenues by customer
class, included in earnings from discontinued operations within the
presentation of the preliminary condensed consolidated statements of
earnings, and average number of customers:
Year Ended December 31,
---------------------------
2007 2006 Change %
------ ------ -------------
(In millions, except
customers)
Residential $338.5 $328.7 $ 9.8 3.0
Commercial 102.3 102.9 (0.6) (0.6)
Industrial 2.7 4.7 (2.0) (42.6)
Transportation(1) 15.1 14.4 0.7 4.9
Other 49.9 58.1 (8.2) (14.1)
------ ------ ------
$508.5 $508.8 (0.3) (0.1)
====== ====== ======
Average customers (thousands) 491.6 482.3 9.3 1.9
====== ====== ======
(1) Customer-owned gas.
The following table shows PNM Gas throughput by customer class:
Year Ended December 31,
-------------------------------------
2007 2006 Change %
-------- -------- -----------------
(Thousands of Decatherms)
Residential 29,468.1 27,556.1 1,912.0 6.9
Commercial 10,655.6 10,409.5 246.1 2.4
Industrial 313.1 580.9 (267.8) (46.1)
Transportation(1) 40,299.3 39,202.2 1,097.1 2.8
Other 5,356.8 6,449.6 (1,092.8) (16.9)
-------- -------- ---------
86,092.9 84,198.3 1,894.6 2.3
======== ======== =========
(1) Customer-owned gas.
PNM RESOURCES, INC. AND SUBSIDIARIES
PRELIMINARY COMPARATIVE OPERATING STATISTICS
The following table shows Altura operating revenues for the period it
was owned by PNMR from April 18, 2006 to May 31, 2007 by type of
sale.
Year Ended December 31,
---------------------------
2007 2006 Change %
----- ------ --------------
(In millions)
Long-term sales $65.4 $125.1 $(59.7) (47.7)
===== ====== =======
The following table shows Altura GWh sales by customer class:
Year Ended December 31,
----------------------------
2007 2006 Change %
----- ------- --------------
(Gigawatt hours)
Long-term sales 915.9 1,683.7 (767.8) (45.6)
===== ======= =======
PNM RESOURCES, INC. AND SUBSIDIARIES
PRELIMINARY COMPARATIVE OPERATING STATISTICS
The following table shows First Choice 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:
Year Ended December 31,
-------------------------------
2007 2006(1) Change %
------- ------- ---------------
(In millions, except
customers)
Residential $390.3 $346.0 $ 44.3 12.8
Mass-market 61.0 81.9 (20.9) (25.5)
Mid-market 141.6 129.2 12.4 9.6
Trading gains (losses) (6.2) 9.3 (15.5) (166.7)
Other 14.0 18.5 (4.5) (24.3)
------- ------- -------
$600.7 $584.9 $ 15.8 2.7
======= ======= =======
Actual customers (thousands) (2,3) 258.4 253.7 4.7 1.9
======= ======= =======
(1) The customer class revenues and the customer counts have been
reclassified to be consistent with the current year presentation.
(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 December 31 is presented in the table above as
a more representative business indicator than average customers.
The following table shows First Choice GWh electric sales by customer
class:
Year Ended December 31,
-------------------------------
2007 2006(2) Change %
------- -------- --------------
(Gigawatt hours (1))
Residential 2,796.9 2,481.6 315.3 12.7
Mass-market 371.8 549.1 (177.3) (32.3)
Mid-market 1,197.3 1,159.2 38.1 3.3
Other 21.1 20.9 0.2 1.0
------- -------- -------
4,387.1 4,210.8 176.3 4.2
======= ======== =======
(1) See note above in the TNMP Electric segment discussion about the
impact of TECA.
(2) The customer class sales have been reclassified to be consistent
with current year presentation.
Source: PNM Resources