TXNM Energy Q1 2025 Earnings Call Summary

1Key Financial Results and Metrics

Ongoing Earnings: Reported at $0.19 per share, consistent with expectations.

2025 Guidance: Affirmed guidance range of $2.74 to $2.84 per share, with a long-term EPS growth target of 7% to 9%.

Earnings Drivers: Benefited from capital investment recovery through TCOS and DCRF mechanisms, and retail load growth, particularly in Texas.

2Strategic Updates and Business Highlights

Rate Base Growth: TNMP's rate base growth supported by timely recovery of investments; system resiliency plan approved for $546 million in capital improvements.

Legislative Developments: New Mexico's legislative session resulted in key bills for economic development and wildfire prevention, enhancing infrastructure readiness for new large customers.

Demand Growth: TNMP reported a 9.7% increase in demand-based load, driven by commercial growth and data center expansions.

Transmission Projects: TNMP plans to invest approximately $750 million by 2030 for projects in the Permian Basin, with regulatory approvals progressing.

3Forward Guidance and Outlook

Capital Investment Plan: Maintained five-year capital plan with significant investments growing from $600 million this year to over $1 billion by 2028.

Upcoming Regulatory Decisions: Anticipated decisions on rate reviews and resource applications in Q2 and Q3, respectively, with new rates expected to be implemented by July.

4Bad News, Challenges, or Points of Concern

Cost Pressures: Increased depreciation, property tax, and interest expenses associated with new investments were noted as challenges.

Demand Charges Impact: New demand charges from energy storage agreements at PNM and lower transmission margins affected earnings.

Regulatory Lag: Concerns about regulatory lag and the timing of cash flows related to new rate implementations were highlighted.

5Notable Q&A Insights

House Bill 5247: Discussed as beneficial for TNMP, allowing for a more efficient capital recovery process and reduced regulatory lag.

Rate Case Drivers: The upcoming TNMP base rate case will focus primarily on rate design and capital structure adjustments after seven years without a rate review.

RFP Process: PNM's RFP for new resources indicates a potential need for 900 to 2,900 megawatts by 2032, with ongoing discussions about resource ownership and tariff impacts.

Legislative Impact: The Texas legislation regarding capital spending was confirmed to be beneficial for TNMP, aligning with their investment strategies. Overall, TXNM Energy's Q1 2025 results reflect a stable financial performance with strategic growth initiatives underway, despite facing some cost pressures and regulatory challenges. The company remains optimistic about its growth trajectory and upcoming regulatory developments.