Good day and welcome to the PNM Resources Second Quarter Conference Call. All participants will be in listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Jimmie Blotter, Director of Investor Relations, Queen of the Universe. Please go ahead.

Thank you, Andrew. And thank everyone for joining us this morning for the PNM Resources second quarter 2017 earnings conference call. Please note that the presentation for this conference call and other supporting documents are available on our Web site at pnmresources.com. Joining me today are PNM Resources Chairman, President and CEO, Pat Vincent-Collawn and Chuck Eldred, our Executive Vice President and Chief Financial Officer, as well as several other 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 assumes 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, quarterly reports on Form 10-Q, as well as reports on Form 8-K filed with the SEC. And with that, I will turn the call over to Pat.

Thank you, Jimmie and good morning everyone. Thank you for joining us today on this Friday of short week. We'll begin on Slide 4 with the financial results and some key Company highlights. Earnings for the second quarter of 2017 were $0.47 on a GAAP basis and $.49 on an ongoing basis. Both of these numbers are increases over the $0.34 reported on a GAAP basis and the $0.40 on an ongoing basis in the second quarter of 2016. We continue to affirm our previously announced 2017 consolidated ongoing earnings guidance of $1.77 to $1.87. I'll get into the details of our regulatory agenda on the next slide, but first I want to report that Moody's updated the outlook for both PNM and PNM Resources to positives in June. In their report, they noted strong financial metrics for our current ratings that helped to offset what they call a challenging regulatory environment. As we've demonstrated in the past, we will continue to focus our regulatory filings to achieve results that are balanced between customers and shareholders. Now, moving on to Slide 5, I'll discuss the updates on PNM's rate case integrated resource plan and other regulatory filings. I reported on last quarter's call that we had reached an agreement on the parameters of a settlement with many of the parties on our PNM generate case. We filed that settlement agreement in early May. The hearing examiners took issue with some aspects of the settlement, so we worked closely with the other parties back later in May with a revised agreement that resolved its concerns while maintaining much of the original agreement including the overall revenue requirement and ROE. We're particularly pleased that all of the signatories to the original settlement remain part of the revised settlement defining common ground on…

Your favorite shark?

Favorite shark.

Okay, I got no choice but to jump in the tank so let's get the proceeding. Thank you, Pat, and good morning everyone. Let's begin our discussion with slide seven. We had a good quarter with ongoing earnings per share of $0.49 compared to $0.40. PNM was up $0.10, TNMP was up $0.02, and Corporate and Other was down $0.03 compared to second quarter 2016. On slide eight let's review the load details for the second quarter. On a year-to-date basis, we're tracking to the middle of PNM's guidance range. Overall, we continue to see the economic conditions in Albuquerque stabilizing and even improving in certain areas, evidenced by continuing upticks in the number of residential housing sales and prices. We also continue to see some of the previously announced economic development wins continue their hiring and other customers expanding their current operations. This leads us to believe that we still are staying within our guidance range for 2017. TNMP continues to perform very well because of the strength in the Texas economy. In fact, they hit an all-time system peak of 1,683 megawatts last Thursday. As a result, load is tracking toward the upper end of the guidance range for 2017. The relocation of various national and global corporate headquarters to the Dallas, Fort Worth area not only results in commercial growth but also residential and small business growth in the surrounding communities that are within our service territory. Earlier this month, CNBC identified Texas as the top of the tops economy for 2017 as businesses continue to migrate to and expand in the state. Additionally, the number of new transmission interconnection request in our service territory, particularly in West Texas, has been increasing over the past several years. This demonstrates that customers are willing to commit sizable dollars…

Thanks, Chuck. And no, we are not up to sharks here just in case if anybody is wondering. As you can see we continue to have a full agenda in front of us for the remainder of the year, particularly on the regulatory front. We are continuing to work hard to deliver results in line with our financial and strategic objectives. Yes, it's a special year at PNM. We're celebrating our hundredth year of service this quarter and TNM is not too far behind at 82-years old. We look forward to bringing in a new century of service to serve our customers in the New Mexico and Texas. Again thank you for joining us today. Operator, let's open it up for questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ali Agha of SunTrust. Please go ahead.

Thank you and good morning.

Good morning, Ali.

Hi, Ali.

Good morning. Chuck, first question, I wanted to pick up on your comments and you indicated you're trending towards the high end. Even at the high end of the range, the math would imply that your second half earnings this year would be down from last year. I mean is there any logical reason for that to happen? How should we be thinking about that?

Ali, there's another major outage at Four Corners so that's probably driving some of the second half of the year comparisons. So I would take that a consideration. And without any other chance to look at the details, I would just say that's probably the more significant driver.

But you would still indicate that you think within the range, I mean is that a scenario that you actually exceed that?

You know as I mentioned we're actually improving on the load as the guidance was only 0.7% in the zero to negative one where we're actually seeing 0.5% so that strength in itself is given us some confidence that we can continue if we have a good - continue to have even a hot summer as we've seen hotter days in the month of June and early July that we would certainly be moving towards a higher end of the range. And we see the same kind of outlook towards TNMP in the growth and the weather certainly being some factors to that.

Yeah. Second question, once this rate case is done and you get the full benefit of that in calendar 2019, so looking at earnings profile longer term beyond '19, I mean are you able to sustain that kind of growth rate or were there some unique circumstances that help you between the moving of Palo Verde into rate-based etcetera that probably don't replicate. I mean how should we be thinking about the growth rate post '19?

We'll talk about that during guidance but as you can imagine the growth is going to be driven by the replacement power for San Juan to the commission continue to if we continue go down the path of abandoning that asset. And also as you curtail from my comments we're seeing a lot of organic growth within the TNMP and Texas and so we begin to see the opportunity to allocate more capital to Texas and serving that additional load growth. So I think those are some of the considerations to think about. It's a little bit too early out for us to put out the capital projections and some of the thinking beyond 2019, but certainly we're seeing some drivers in the business that are related to opportunities to sustain some reasonable growth in the business and it's just too early to say what that number is.

And last question, back to you, we're continuing to see extremely high lofty valuations on the M&A front, I guess the Canadian folks have a lot of capital to spend here. I know you've said in the past consistently, hey, somebody comes obviously we'll to do the best thing for shareholders. But as you look at the market and you keep looking at these kind of valuations, does that caused you to think about being more proactive and looking out and seeing if there are opportunities to get huge premium multiples like we're seeing in the industry?

Our focus remains on the plan and our continued ability to execute on that plan and certainly as we begin to recognize the consolidation of the industry doesn't appear to be changing any regardless of whether it would be some delay with tax reform or the Canadian companies continue to pursue things. So we'll continue to focus on the plan and we will always try to find ways to create value for our shareholders in doing the right thing in regards to any M&A activity.

Thank you.

Thanks, Ali.

The next question comes from Insoo Kim of RBC Capital Markets. Please go ahead.

Hey, good morning guys.

Good morning, Insoo.

Hi, Insoo.

First question, I don't know if I missed this earlier but regarding PNM load growth, it seems like the decline year-over-year into the second quarter was definitely less than a yearly forecast then for the year were kind of in that midpoint. Are you seeing anecdotally or just business wise things happening that may give you more confidence than that figure going forward?

We're seeing small wins in New Mexico that giving us some confidence, it's just a very slow recovery of the economic conditions in the load growth. So it's nothing to the extent of seeing significant upticks in the load growth, but certainly our view is more trying to look for stabilization in that load growth and not to continue down significant decline as we've seen in the last few years. So at this point, we're encouraged by the fact that we're doing better than we anticipated. Certainly with Facebook's load increasing the load on the system that may have given an appearance that load will continue to increase but as we know the economics in the way we treat Facebook is slightly different but we're beginning to look for stabilizing the load expectations going forward.

Understood. And just one other question for me, regarding the '18 filing of the future of San Juan, what's the timeline after you file for a decision and if that decision is for an alternate retirement in 2022, what is the timeline process for getting ready for that replacement capacity with the peakers and renewable that went on?

So there are couple of things that are going on since the filing of the IRP, we're certainly in an outreach effort between now and the end of the year to talk about the IRP within the communities and others community leaders are interested in learning more about what the process is about and what the decisions are around San Juan. But the next step in any IRP is to begin to look at the replacement power. So we'll look to begin to put out IRPs in around September timeframe and begin to evaluate those. Certainly early next year, looking to select potential bids in the February to April timeframe next year and as you know we have to file with the commission sometime between July and December of 2018, our plans for any abandonment of the asset itself. So, we're working to identify what the replacement resources would be, what the actual cost would be and what the right mix would be and then work towards the final filing with the commission and looking for a decision certainly sometime in 2019.

And then the CapEx relates to that potential replacement capacity would be let's say second half of '19 and into '20, '21 timeframe, I guess more backed and muted to the beginning of the current period.

Yeah keep in mind, you get - you still have the inventory out there, coal supply that kind of pursues the closure into the mid part of 2023. So, you get some additional months involved with after the plant is shutdown in 2022, it will allow us to sustain the operation and then we would look to begin to - I'd look, we got two year timeframe for permitting and actual construction of any replacement power after that May 2023 date.

Okay, thank you and I also believe Jimmie is the Queen of the Universe.

Thank you, Bill.

[Operator Instructions] The next question comes from Lasan Joong of Auvila Research Consulting. Please go ahead.

Thank you. So we certainly in a big way add money on the path.

Add Chuck.

Okay, so are you guys telling studies on cost effect to your retail customers shutting down San Juan from all corners [ph] and how much of a continuation will this be going forward, and how contentious do you feel going forward?

Yeah, I mean the IRP itself and Jimmie can send you some of the information in the IRP that kind of helps capture the message, but we're factoring all the cost of abandonment, retirement, decommissioning, return off and return on to make the decision to whether we continue our operation or we have a shut down. And so the economics are really driven by the load environment within New Mexico as we've seen in the past, a significant clarification is my earlier comments, just a very slight, maybe working towards a stabilized flat type low going forward, that the low growth along with lower gas prices, the economics of that plant just don't continue to justify its operation. So, we can provide you more detail and sensitivity around that information Lasan to give you better understanding of it, but that's really what's driving it, is the conditions around low gas prices and that the fact low doesn't continue to significantly increase which is what we'll have to do in the Mexico to justify the operation of that base load plant between now and 2022 and then even beyond that it would be a significant an increase in load to justify it. So, that's what's driving the decision, certainly we'll work towards working with the commission on that abandonment process and then also how we feel would be most affordable and reasonable for the replacement power.

Lasan, our actual rules require that we pick the least cost portfolio, so the portfolio we pick is the least cost to customers.

Excellent. [indiscernible] San Juan was in base-load generation, you're looking to replace it with peakers and renewables, can I assume that the new win in the solar, how does that act as a base-load generation plant and the peakers are going to be filling in the gaps and they're covering for the volatility or the inconsistency of the renewables. Is that how to kind of think about it?

Lasan, you've explained it well. It's balancing the system and the fact that as you add more renewables including the renewables we'll be putting on line for base work that continue the energy output from both wind and solar requires that we have, peaking units to fill the gaps would balance the system and provide more reliability for our system as we go forward and transform out of the need for the base-load generation to a more flexible and reliable generation source.

Got it, excellent. [indiscernible] suspension periods in January 6 and potentially two months extension option that I think it's March 8. Can I still assume that the effective date will Jan 1 [indiscernible]?

Well, that's the litigation period really would end to that January 6 and that was the original expectation when we filed the case. It did take a little bit longer for us to work through settlement and the commission I think in their own efforts to caution and give themselves - add a quick time to have proceedings and make the right decision felt the request for additional 60 days was appropriate, given the fact the stipulation was a little bit longer than anticipated, so it's too early to tell. When the hearing examiner makes a recommendation we like to think that they're making in early October and there will be sufficient time for the commission to render decision before the end of the year. But to be cautious, certainly they have every right and authority with what we've granted with the extension to wait till March 6 for a final decision. So, we'll just have to let the process roll out and see what happens.

But I'm assuming that that final decision will be retroactive for January plot correct?

No, actually it doesn't. It goes in effect of the date in which the order is rendered. They might go ahead and implement a date. So there is now retroactive. And as you can see we talk clearly that 2018 is a transition year for us and we have a faced in on this stipulation which reflects that obviously '18 earnings potential is going to be lower than what we'd anticipate year-over-year, but that's because of the face in and potential consequences of a delay in the rate case and our focus is continuous and has been on 2019 to reflect a full year earnings and valuation in the business.

Just the last question to me, on the room making and you told rating pause, is that going to cover the time of the use and simplification of the rate structure issues?

No, it's more around policies and rate case in terms of standardized methodology for ROEs, regulatory assets, those kind of things. It doesn't go in the rate design.

Part of the reason why we [indiscernible] the original 2018 rate case was because there was that rate design issues in there and I was under the impression that would be handled through a separate subject. Am I misunderstanding something here?

The rate design issues of the 2018 rate case promote as a couple class specific issues and we've handled those and there's also the fixed change issue, but we continue to try to work decoupling, but right there's no set docket for rate design. The commission's pretty busy.

And we're going to address the LCFC and some of the other components that we're contingent with the settlement parties, so that if we do come to some agreement, we would file that as the next rate case which haven't announced at this point.

And the next rate case. Okay, great. Thank you very much.

It would have to really fall into the next rate case that we - we came to an agreement of some rate design relative to the LCFC component of the rate design to include at the next rate case filed.

That's great, thank you.

Thanks, Lasan.

The next question comes from John Barter of KeyBanc Capital Markets. Please go ahead.

Hey, good morning everyone.

Good morning, John.

Congratulations. Everybody wants to know, John got married a couple of weeks ago.

I just want to follow up Chuck and just to be clear. So, to date you'll be in the upper half of guidance this year, but with good weather you could hit the high end.

Yeah, that's there. We're still within guidance is the expectation for the year and given where we had a good performance for the six months, we'll see how the summer months ago. But we feel like we're moving in the direction of the upper end of that guidance range.

Okay, thank you. That's it.

This concludes our question-and-answer session. I would like to turn the conference back over to Pat Vincent-Collawn, Chairman, President and Chief Executive Officer for any closing remarks.

Again thank you all for joining us this morning. I hope you all enjoy the rest of the summer and we look forward to seeing all of you throughout the year. Thanks, again.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.