Good morning. Welcome to the PNM Resources Fourth Quarter Conference Call. [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. Please go ahead.

Thank you, Debbie, and thank you, everyone, for joining us this morning for the PNM Resources Fourth Quarter 2018 Earnings Conference Call. Please note that the presentation for this conference call and other supporting documents are available on our website 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 our fourth quarter earnings call, which for those of you keeping track, is our second consecutive year of announcing earnings on International Polar Bear Day. And for those of you that are wondering, none of us are dressed up as a polar bear. So let's begin on Slide 4, with the financial results and some company updates. Our GAAP earnings per share in the fourth quarter of 2018 reflect a loss of $0.69 compared to a loss of $0.68 in the fourth quarter of 2017. Ongoing earnings per share are $0.18 compared to $0.24 in the fourth quarter of last year. For the full year, GAAP earnings per share are $1.07 in 2018 compared to $1 in 2017, and ongoing earnings are $2 compared to $1.94 in 2017. During the fourth quarter, we experienced continued increases in customer usage attributed to both load growth and weather in New Mexico. These factors contributed to earnings above the top end of our guidance range for 2018. For 2019, we have also narrowed consolidated earnings guidance to $2.10 to $2.18. Chuck will provide further details on the financials in a few minutes. We began 2018 with the implementation of tax reform and working towards regulatory approval of our settlement in the general rate review at PNM. We noted that 2018 would be a transitional year as the phase-in of rates in our settlement at PNM and our inability to make TCOS filings during our general rate review at TNMP would limit our earnings potential in 2018. We believe that we had started to turn the corner, with load growth at PNM and would see some positive impacts, albeit not until 2019. By time we finished the second quarter, though,…

Thank you, Pat, and good morning, everyone, and thank you for joining. I'll apologize in advance, I have a slight cold, so there may be a little coughing or clearing my throat as I go through the information this morning. But again, let me start with Slide 7 with a recap of 2018 segment earnings results. Ongoing earnings per share are strong at $2 for the year. PNM's earnings were up $0.06 for the year. We have several items affecting earnings that were included in our guidance for the year, such as: the combined effects of the retail rate phase-in, changes in tax rates and the generation portfolio changes that included bringing Palo Verde Unit 3 into rate base; lower gains from decommissioning and reclamation trust; and depreciation and property tax expense; increases from our capital investment. We also had some additional O&M expenses in the second half of the year to support growth across the PNM system, including routine maintenance at our plants as well as some additional work on our distribution system to support growth and maintain system reliability. These were offset by the lower interest expense at PNM due to refinancings. Additionally, the increased load that Pat mentioned and colder temperatures in New Mexico during the fourth quarter further improved results, with heating degree days 17% higher than normal and 65% higher than the prior year. Earnings from third-party transmission customers also came in at the top of our expectations. TNMP is up $0.11 for the year compared to 2017. Drivers include continued strong load, TCOS filings that have been implemented during the time frame and AFUDC. These are partially offset by the increase in depreciation and property tax expense. Finally, Corporate and Other was down $0.11 for the year. This was primarily for increased interest expense…

Thanks, Two Buck Chuck, and thank you all for joining us today. Our team has been working diligently for the last several years to move in the direction of our Integrated Resource Plan and transform PNM's generation portfolio. It's been refreshing to see the number of stakeholders supporting this direction and joining efforts to move down this path together in a way that considers so many different positions. Out of respect for these ongoing efforts, let me remind you that we will not take in any questions on the call today that apply into the open docket and speculate on the outcome of the legislature. You are welcome to contact Investor Relations to catch up on any previously discussed details related to these items and we will disclose any future events appropriately. Operator, let's please open it up for questions.

[Operator Instructions]. The first question comes from Paul Ridzon with KeyBanc.

I hope I'm not going into the forbidden zone with this question, but what's going on with.

That's okay, Paul. If you do, we'll tell you.

If you're already there, Paul, just don't ask the question.

What's happening with Farmington and Acme?

As we've said after interacting with Farmington for about two years, we were surprised that there was a meeting last week with the City of Farmington and Acme and to hear of their announcement to keep San Juan Generating Station open. So as we've said, our contract calls for the orderly shutdown of the plant, and we'll have to see. That's all we really know.

If for whatever reason, that plant stays open, how could that impact your RFPs?

Well, at this point, Paul, we have every intention to shed our ownership interest in San Juan. So regardless of what theoretically is being proposed by Farmington, from our view, we're exiting San Juan and we'll replace the power accordingly to meet the objectives of, hopefully, supporting the Energy Transition Act if it's been passed. But we will in no way accept any sort of PPA or any continued involvement after 2022 for San Juan. We've made that decision. It's up to the commission to ultimately decide the abandonment. But that's our plan and we'll continue to pursue it that way.

And there are several bills, Paul, that talk about higher renewable portfolio standards, so I can't see any coal fitting into our plans.

The next question comes from Ali Agha with SunTrust.

Just I don't want to get into the politics of the legislation, et cetera, but can you just tell us the time line of the process and what milestones we should be tracking from the outside?

Absolutely, I'm happy to talk about the process. It passed the first committee, which is the Senate Conservation. It should soon go to Senate Corporations & Transportation. And then after that, it would go to the full Senate. And then it goes over to the House. It's probably going to be assigned to a committee in the House, but remember the, one of the co-sponsors of the bill is the Speaker of the House. And then it would be scheduled for a committee hearing, read on the floor. It's got to have another committee hearing. If it does have a second committee hearing, and then it would be read out on the floor again. It's got to have a third read for both the Senate and the House. And then it would move to the governor and then the governor has to act on bills by April 5. If signed, the bill becomes law on June 14.

Okay. And the legislative session itself, when is it scheduled to end?

March 16. And just remember, a lot of the work that goes on in the New Mexico legislature in the first 5, 6 weeks, is committee hearings, the budget, that kind of stuff. So most bills in the New Mexico legislature get passed in the last 2 to 3 weeks of the session. It's just been a historical pattern. If you went out and did a Pareto of bills passed, you'd see that they're all passed in the last few weeks.

Got you. Secondly, I wanted to clarify, Chuck, the earnings power slide, particularly the numbers for '20 and '21, the increase in both years, is that all driven by that incremental CapEx that you're now assuming in your base plan for '20 and '21? Or is there some other changes embedded in those higher numbers?

No, if you - when you get through and work through the numbers, you will see where we've added $255 million for both T&D at PNM and TNMP. So it's like $50 million a year for PNM and $25 million a year for the next three years for TNMP; on top of that, the $30 million we just added for 2019. So the growth on that slide on the earnings potential, if you look at the bottom section, you can see where we've identified, of the $350 million in 2021, which again, represents new transmission and replacement power for San Juan, we assume that - that half of that amount, just for planning purposes, and then the balance of that would be in 2022. So that particular amount is really based on the ultimate objectives and decisions that are made through what replacement power and new transmission to support renewables occurs in New Mexico. But that, you can see, is outside of the base plan. And again, our base plan does support the earnings growth target of 5% to 6% from '18 through 2022, as we've previously stated.

Right. And last question, to the extent that all of that growth CapEx does make it into base and everything falls in your favor, what kind of an incremental rate impact does that sort of imply for New Mexico customers? And is that sort of a constraint, in your mind, when you're thinking about that incremental CapEx?

Well, we certainly are very careful of how we think about rate cases and customer impacts, but it's important to realize that we're dropping about $320 million of rate base out of PNM, and we're adding additional rate base. So you're really, the incremental amount of our rates is going to be dependent upon what exceeds that amount of rate base in 2022 after we shut the plant down. So we're always sensitive about that. That's why we've got $245 million of additional capital for both PNM and TNMP that's in, call it, a prioritization bucket that's based on timing and that will be released as we begin to see what the development is on the replacement resources and new transmission in New Mexico. But again, we think we're clearly managing our expectations for the earnings target growth of 5% to 6%.

And remember, there are a couple of offsets, right? Securitization takes customers' bills down. And then assuming we get the permission to recover our investments in the Energy Imbalance Market, that's a significant savings for customers, too. That goes through the fuel clause, so there's offsets to what Chuck is talking about.

I got you. And Pat, just remind us, when is the next rate case in New Mexico expected to be filed?

We've been talking about the end of this year.

End of this year, got you.

[Operator Instructions]. Our next question comes from Julien Smith with BOA.

This is Alex Morgan calling in for Julien. I have two further questions. First, I wanted to go off of the time line process question and specifically touch base on when you would expect to release more information of the replacement generation for the San Juan generation facility?

As we've said, we really don't see the ability to finalize the announcement until second quarter, probably the latter part of second quarter, around the June time frame. So a lot of this is dependent upon other components, updated load growth, finalizing the process for the RFP in replacement power, knowing what the Energy Transition Act ultimately passes and indicates. So there's a number of factors that are still incomplete in our ability to file for abandonment and that application and identify replacement power. So I would look for that more along the June time frame.

And secondly, I wanted to just ask about amending the legislative bills. I know that at the last PRC meeting, the commissioners asked questions around this and I was wondering if there's any updates on how easy it is to amend one of the proposed bills.

Well, you have to get through the committee process. And on Saturday, for example, when it was in Conservation Committee, there were some friendly amendments made by the sponsors to clear up some technicalities, no other amendments were accepted. So you basically have to get your amendments into the committee and have them accepted by the committee. It's not that easy of a process, because I think in general, the people that have written the legislation have spent a lot of time on it. They've had huge involvement in parties. And so they don't want folks coming in and mucking them up. That said, amendments can be made, but I don't consider it that easy of a process. There's a lot of good sponsorship in both the House and the Senate and they are very protective of the work that they've done and of the trade-offs that they have made with all parties.

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

Thank you. And again, thank you all for joining us today. Have a safe and happy rest of your day, and we look forward to seeing you all soon. Thank you.

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