Good day, ladies and gentlemen, and welcome to your PNM Resources Fourth Quarter Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn this conference call Lisa Eden, Director of Investor Relations. You may begin.

Thank everyone for joining us this morning for a discussion of the company's 2011 Fourth Quarter and Year-End Earnings Conference Call. Please note that the presentation for this conference call and supporting documents are available on PNM Resources website at pnmresources.com. Joining me today are PNM Resources Chairman, President and CEO, Pat Collawn; and Chuck Eldred, our CFO; as well as several members of our executive management team. Before I turn the call over to Pat, I need to remind you that some of the information provided this morning should be considered forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. We caution you that all of the forward-looking statements are based upon current expectations and estimates, and that PNM Resources assume no obligation to update this information. For a detailed discussion of factors affecting PNM Resources' results, please refer to our current and future annual reports on Form 10-K and the quarterly reports on Form 10-Q, as well as current reports and future reports on Form 8-K filed with the SEC. With that, I will turn the call over to Pat.

Thank you, Lisa. Good morning, everyone, and thank you for joining us on this leap year day morning. I'm going to start the presentation on Slide 4 and review the significant progress we made last year strategic goals. Regarding our first strategic goal, earned authorized returns on our regulated businesses, we have made momentous progress. As you are aware, we implemented a $72 million retail rate case for PNM in August, and PNM is pursuing separate FERC transmission and generation rate cases. As we reported to you before, PNM is well positioned to earn its allowed returns on its jurisdiction rate base by the end of this year. For 2011, PNM's return on its New Mexico retail rate base was 8.9%, a significant improvement from a couple of years ago when it was in the low single digits. At TNMP, a general rate case in advanced metering system docket moved forward smoothly and with the needed pieces to provide the foundation for TNMP to earn its allowed return of 10.1% in 2011. Regarding our operational goals, PNM had strong plant availability in 2011, and both of our utilities had solid reliability. Page A-4 of our appendix has the details baseload power plant performance for 2011 and expected performance for 2012. As you know, securing rate release is half the story for providing strong financial performance. The other half is keeping O&M and capital costs under control and within budget. 2011 resulted in superb cost containment, and our employees continue to do more with less and work efficiently in all corners of our business. It is worth emphasizing that we have aligned and synchronized our expenses with revenues and we'll pursue future rate cases and another appropriate regulatory mechanisms to balance the need to earn an appropriate return for our shareholders…

And thank you, Pat, and good morning to everyone. As Pat described, 2011 was a true transitional year for PNM Resources. We've had a long journey of evolving and executing the strategic vision of the company. Looking back over the past several years, we sold our gas business, reinstated our fuel costs and moved merchant plants into rate base, not to mention having achieved a number of rate increases totaling more than $200 million between PNM and TNMP. 2011 also marks our exit of the competitive businesses and resulted in a further strengthening of our balance sheet and improved credit ratings. Going forward, we are a regulated utility with a strong focus on earning our allowed returns. As we discussed in our guidance call in December, we have a number of areas that we'll be concentrating on including adding to our rate base and working to improve the returns and our FERC generation and transmission businesses at PNM. Now turning to Slide 9. As you read in the news release, ongoing earnings were $0.22 for the fourth quarter of 2011. This was a $0.25 increase year-over-year. The majority of the improvement came from PNM and TNMP for a combined total of $0.16 and was largely driven by rate relief. Another factor was the fourth quarter 2010 loss at Optim of $0.05 for which there was no comparable activity this quarter due to the exit of the business. Our full-year 2011 ongoing earnings were $1.08, up $0.21 from 2010. We exceeded our guidance range by $0.03 primarily because of the cold weather in December. PNM and TNMP were the major contributors to the improvement in earnings, and I'll cover the drivers for those businesses in a moment. The corporate and other segment was up $0.06 year-over-year, primarily because in 2010, we…

Thanks, Chuck. We'll finish today's presentation with a 2012 checklist. We introduced this particular checklist last December to communicate to you the specific objectives we need to accomplish in order to be successful in achieving our strategic goals listed on the left side of the slide. We will continue to focus on our key strategic goals of earning our authorized return on our regulated businesses, improving our credit ratings and providing top quartile returns. We feel strongly that by being successful in the future-test-year rule-making, our FERC transmission and generation rate cases as well as the PNM renewable rider, we'll make significant strides towards the goals. And as always, we focus on maintaining strong electric reliability and power plant availability. We will also continue to control our O&M and our capital costs to ensure that our businesses are operating as efficiently as possible to keep rates down for our customers. With that, we can start the question-and-answer portion of the call.

[Operator Instructions] Our first question comes from Anthony Crowdell with Jefferies. Anthony C. Crowdell - Jefferies & Company, Inc., Research Division: A question, I guess, on the SCRs, I believe you guys are planning or you're, I guess, going about to installing to San Juan plant. I mean, are you going to wait for court decision? Or does the company plan to file a single issue rate case in New Mexico to recover associated environmental costs?

What we're doing on those is we should know in March whether or not we have to stay by the 10th Circuit Court of Appeals. We will continue to go down the road of getting the bids in for the SCRs for the time -- the 5-year compliance period. We haven't decided when we will need to do a single issue or if we will need to do a single issue for that to get that cost recovery, but it wouldn't necessarily be linked to the court decision. If we're spending significant amounts of money, we will want to go ahead and file for that.

Our next question comes from Brian Russo with Ladenburg Thalmann. Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division: Just your 5-year total return performance of roughly 10% to 13%. If we just kind of assume your 3.3% yield, does that imply about 7% to 10% average annual EPS growth over that time period? How should we kind of think about that?

Well, you think of it in terms of understanding that we'll look at both components of dividend yield and earnings growth in the time of the rate relief and what the board and management thinks is appropriate relative to being consistent in our ability to grow that dividend and make it sustainable. So you can back into the numbers that way and look at it that way but we also wanted to emphasize that the total return over 5 years on average, along with our peer groups as to how we measure the results and we realized from year to year, you can have some variability relative to earnings and some lag on rate recovery. But the objective is to get a total of the 10% to 13% at the end of the top quartile. Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division: And are you using 2012 as the base?

Yes, Brian, 2012 is the base year. Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division: Okay, great. And you mentioned the next PNM electric generate case filing for new rates in '14, assuming you move forward with the forward test year. What would be the test year that would be, would it be a '14 test year reflected in 2014?

Yes, Brian, it would be a '14 test year. Brian J. Russo - Ladenburg Thalmann & Co. Inc., Research Division: Okay. And then lastly, you mentioned PNM Resources pursuit of investment grade is still work in progress. I mean, any thoughts or initiatives to pay down some of that apparent debt that's creating quite a bit of earnings drag.

No, Brian, right now, that debt is at 9.25, and it's not callable. So it would be expensive to pay it down, obviously, we'll monitor interest rates if interest rates would change and go up that dramatically, we would look at it. But right now, we just plan to leave it there.

[Operator Instructions] Our next question comes from Ali Agha with SunTrust.

Talk about just also to be clear, when you talk about the total return and you talked about 2012 base year. So to be clear, we're looking at, let's say, the midpoint of the '12 guidance range. That's the starting point and then, we're taking 5 years from there. So '12 through '17, or are we looking at the '11 actual and then '11 through '16.

You're looking at '12 being the base, the results from 2012 going forward and what kind of earnings projections that we would ultimately provide along with the dividend yield that we set for this year and 2013 going forward. So I think, just look at 2012 and the growth from '12 to '13 and so forth.

Got it. And on the dividend itself, you mentioned ultimately, the goal is 50% to 60% is kind of where you think you need to be. Just from philosophically thinking about it, you took a step towards that, when do you think you should be there? I mean, is this is a multi-year process? Or should we think that the next increase should basically get you there?

Well, what we've said is we want to make sure we have a pretty clear direction relative to the capital requirements of the business going forward given that SCR's, renewables, other types of investment peaking use, et cetera. And once we gain certainly around that path, then certainly, we'll evaluate at what point we think the payout ratio would be achieved at that target of 50% to 60%. So just I think, at this point, the message is really should focus on average 5-year return, the 10 to 13 knowing that there could be some movement on earnings year-over-year and trying to work towards achieving competitive dividend yield as a regulated business. So it's really hard to pin down. I don't want to say at this point any particular day but know that we are committed and very focused on delivering that total return.

Absolutely. The board, Ali, looks at it every February. And the more clarity we get around capital, the more we're able to do. We've got a lot of big capital staring us in the face.

Right, right. And then lastly, if I looked at the PNM Electric business as a whole, the [ph] components et cetera, can you just remind us, so for 2011, what was the actual ROE for PNM Electric and TNMP? And what's sort of embedded in that midpoint for your '12 guidance range?

The actual for the PNM retail was 8.9% last year. And for TNMP, we earned our allowed return, which is about 10%.

And what's embedded?

The assumption for PNM for 2012 is that we will earn our allowed returns.

And for TNMP.

Yes, for TNMP. If we could just go back and just pull the guidance information, investor relations can kind of walk you through some of the information we provided back in December to make sure it's clear on what the assumptions were behind that.

Yes. So the 8.9% was retail, so is it fair to say as a whole, maybe 100 to 200 basis points below that because of the FERC? Or was that too big of a drop?

We were breakeven on the FERC portion of our rate base, and that's...

Well yes, we did the numbers, just remember it's 7% of the PNM rate base. It's really reflected on that FERC piece. So you can kind of work through the numbers and come up with what that return would be.

Our next question comes from Mori May with Power Insights.

A couple of questions. First of all, you didn't mention the outlook Palo Verde 3 investment, and I was just wondering whether you can give us some kind of insight there as to what you expect in power prices and profitability and whether you plan on trying to rate base that investment.

Yes, Hi, Maury, this is Chuck. I think, the conversation we've had around Palo Verde 3 when we talked about our outlook towards that, it is an option for us and how we think about the business going forward. We're focused as being a regulated business and so certainly, that option does allow for us to consider putting that into rate base at some point in the future. At the current state of where power prices are, we certainly realized that the energy prices in the market today don't allow for a very real contribution to the business in the earnings power of the business. The potential is there with the energy prices going up that we could certainly see some significant improvement. When we talked about guidance, we were around 60% unhedged and 40% hedged. We continue to look at our rolling 12-month hedging strategy which there have been some opportunities to benefit slightly from where we had originally projected but it's just too early to say where we might end up for the year. But at this point, we want to keep that asset as an option. We consider it to add a lot of value for the business and certainly, we'll play that option to where we think shareholders can gain the greatest value.

Okay. If you wanted to put it into rate base, what kind of pushback might you get from the PRC?

Well, they've been very supportive towards nuclear in the past, and there's no reason to think they wouldn't consider that going forward. So as we file for integrated resources plan and what our low growth is and our needs for resources, that gives us the option to have that kind of discussion. But certainly, they view it as indicated in the past as a very supportive towards nuclear assets.

The discussion with more on what the price put it in as opposed to the fact that it's a nuclear power plant.

And after that, the fact it doesn't have emissions so there's some value from an environmental standpoint that would also gain some benefit to other intervenors that might think of our resource additions going forward.

Okay. And what is the book value of Palo Verde 3. I know it's in the 10-K, but I don't have it opened.

It's about $1,000 per kilowatt. So it's about 134 -- excuse me, about $1,000 per megawatt and there's about 134 megawatts.

Okay. $1000 a kilowatt, I think, you're right the first time. And then second of all, this initiative on rules for the forecast test year, I know the staff was working on it in January. I guess, you have opened the docket in February. But what is the outlook there, timing wise?

I don't know that I would forecast what the timing outlook on that is. I think, that there is 2 things. One, remember in the stipulation that was filed last time, there was some future test making principles that all the signatories agreed to use, even if the commission didn't have a rule-making so there is a backstop unit this rule-making doesn't happen. We would hope that they get started on it relatively soon, and I know as staff that we would all like to do that. But trying to forecast the time of there isn't a winning proposition.

Okay. And last question has to do with the dividend. The midpoint in your guidance range for 2012 is $1.26. And that is really less than where the dividend went and if you take the 50%, if you take the bottom end of your dividend range as from the -- the midpoint of the $1.26. It implies a dividend rate of a little higher than $0.58. So I'm wondering why the board was so conservative in the dividend boost?

Mori, we want to be conservative because of the comments about the uncertainty around the capital spend to support a number different aspects of the business going forward with the SCR and the renewables, peaking units, potential for new gas units down the road. So we want to be sure that the message is very clear that the dividend is very sustainable, and we're very comfortable with the outlook towards the business and as we plan and execute our strategy within the business, we expect to deliver above-average dividend growth. I think, this is the right thing to do as a first step, the board feels good about where we positioned the business today, and it is sustainable. And we fully expect to have average dividend growth that could exceed normal expectations going forward but we just want to just take in steps.

Okay. So it'll be more than a couple of years until you get that competitive dividend?

We don't want to commit to anything.

There's so many variables in that equation, Maury, to make a commitment.

I'm not showing any further questions at this time. I'd like to turn the call back over to Pat for closing comments.

Thank you. Well, thank you all for joining us. I hope you all enjoyed this extra day of the year that we have this year, and we look forward to talking to you on our First Quarter Earnings Call. Have a great one.