Good day and welcome to the PNM Resources Q3 2019 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lisa Goodman, Director of Investor Relations. Please go ahead.

Thank you, Sara, and thank you everyone for joining us this morning for the PNM Resources third quarter 2019 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. With that I will turn the call over to Pat.

Thank you, Lisa, and congratulations on your appointment to Director of Investor Relations. We're all very happy for you. Good morning, everyone. Thank you for joining us today on our third quarter earnings call. It's also National Cook For Your Pets Day today. And some website say its National Men Make Dinner Day, others say National Men Make Dinner Day is next Thursday. So whatever day it is gentlemen start preparing. But let's begin on Slide four. Our GAAP earnings per share in the third quarter of 2019 reflect earnings of $1.28 compared to earnings of $1.9 in the third quarter of 2018. Ongoing earnings per share $1.29 compared to $1.8 in the third quarter of last year. We are affirming our guidance of $2.05 to $2.11. Chuck will provide further details on the financials in a few minutes. In terms of highlights of the quarter, higher temperatures increased our loads at both PNM and TNMP. At TNMP, this reflects get another all-time record system peak reflecting the growth that continues across Texas. On the regulatory front TNMP filed its second key cost filing in 2019 for recovery of $22 million of transmission investments across its system and this filing was approved in September. These rates were implemented on September 19, and will increase annual revenues by $3.3 million. In New Mexico PNM received approvals from both FERC and the New Mexico Public Regulation Commission to acquire the Western Spirit Transmission Line in 2021. This is not only a significant investment for PNM, but it is a key project for further in New Mexico's plans to be a clean energy leader. The line will have the capacity to move 800 megawatts of wind energy investments across the state and encourages further investment in renewables. We continue on our path to…

Thank you, Pat, and good morning everyone. I'll get started with a recap our results from this quarter before we getting into our refresh capital plans. Let's start with slide eight. As Pat mentioned earlier, higher temperatures increased load in earnings at both PNM and TNMP. This was a welcome change following our record low temperatures in the second quarter. As a result, we were able to ease up on some of the cost reduction plans that we put in the place a few months ago. We continue to target the midpoint of our guidance at $2.08. All of the detailed drivers are included in the appendix, you will note that PNM continue to benefit from the second phase, our implementation of rates that began in January, 2019 and at TNMP results increased from the implementation of base rates and key [Phonetic] cost increases this year. At both businesses, these increases were partially offset by higher depreciation expense and property tax as a result of increased capital investments. Corporate and other was up $0.03 as a result of our effective tax rate, because we are consolidated taxpayer, taxes at the corporate segment are influenced by the timing of the earnings at PNM and TNMP. Now turning to Slide 9, At PNM, we continue to see a steady increase in customer and job growth across PNM service territory. In recent newspaper articles have touted New Mexico's job growth as being one of the top of the nation, these jobs are primarily in the private sector with the highest growth in the leisure and hospitality sector followed by professional and business services, and then education and health services. Weather and Load increased third quarter EPS at PNM by $0.05 over last year. Weather was the primary driver for this increase as cooling…

Thanks, Chuck. Before I open it up for questions, I want to wrap up with some of the great things that company has been doing. Our plans to replace San Juan have garnered support from those who see the value in moving to a cleaner generation portfolio. Last week we celebrated the completion of the San Miguel Solar Energy Center that, that's 20 megawatts of solar to our portfolio to serve retail customers along with boosting tax revenues for the county that can be used to support infrastructure and education. The PNM Resources Foundation awarded three quarters of a $1 million in grants this quarter, to support STEM education, energy efficiency and economic vitality. This past weekend, our employees volunteered in droves [Phonetic] at our largest annual low-income assistance event where customers not only receive financial support from the PNM Good Neighbor fund to pay their electric bills, but also a variety of other services from more than 40 agencies. This week, some of our crews in New Mexico headed up to California's to aid in restoration efforts. And in Texas our TNMP crews assisted on core restoration efforts following the Tornado that swept through Dallas last month. This type of service is invaluable to our industry and speaks so well of our Public Service mantra. It's our committed employees across New Mexico and Texas that are making these things happen and earning recognition for PNM and TNMP. I'm proud to be a part of this team and my role in making our company and our communities a better place to live, work and play. So Sara, let's please open it up for questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Julien Dumoulin-Smith with Bank of America Merrill Lynch. Please go ahead.

Hi, good morning. This is Alex Morgan calling in for Julien. Good morning. Thanks for taking my question. My first question is actually about rate cases. I was wondering if you're planning on going in for a rate case at PNM and New Mexico at the end of this year.

Yes, Alex. As I mentioned in my comments that we would look to delay that rate case until the early part of second quarter.

Okay, thank you so much. And then, I was just hoping for potentially a little bit of clarity around the block issuance versus the ATM. Is that something that we should be thinking about incrementally for 2020. I know you said the timing is not exactly out yet, but I was just looking for a little more clarity there.

Yes, if you look at -- if you reference our potential earnings power slide that we have in our deck, in the appendix, you'll see an footnote, number right, we show you what the equity amount is for each year, and you can think about the forward block sale, was that, if we continue on this plan we would drawdown the equity needs to be reflected on each of those years. So just go to page 17, in the earnings power slide in reference, the earnings power and footnote eight and you'll get your details.

Okay, great. Thank you. That -- that's all the questions that I have today.

Thank you, Alex.

The next question comes from Ali Agha with SunTrust. Please go ahead.

Thank you. Good morning. First question, I had a -- the incremental CapEx at TNMP are you looking at any, are there any constraints in terms of dialing that up, are those projects all locked in customer rate impacts any of that factoring in -- this all fairly comfortably within all those parameters, as you look at those numbers.

Yes, we're very comfortable, they're all built into studies that the ERCOT is provided and demands and request we have our customers, so no concerns or issues it's locked into our plans and we'll file through the TCOS and DCOS mechanisms in order to recover our investments.

Okay. And then with regards to the ETA applicability any further discussions or clarity from where the commissioners currently stand. I know there have been some public statements, back and forth. And you laid out where all the other interveners are, but what's the latest thoughts on how commissioners are thinking about it.

Ali, it's Pat. I think that they're waiting until all the briefs are filed, until the Hearing Examiner comes out with a recommendation. So until then we really don't have line of sight into what they're thinking, which is -- as it should be.

I see. And finally, Chuck. With regards to the equity, is that a particular regulatory approval or any puts for triggering event that you're looking to have completed before you embark on that program or how are you sort of thinking about that right now?

Now, we have all the Board authorizations in SEC regis -- statements are already filed so it's just a matter of when we decide to issue the equity.

Right, I was thinking from more from a regulatory point of view.

No, there is no, there is no issues on the regulatory front at all.

I see. Thank you.

No, no -- no additional steps at all.

Thank, Ali.

Yes, yes, thanks.

Our next question comes from Paul Fremont with Mizuho Securities USA. Please go ahead.

Thank you very much. Can you discuss at all -- I guess there is an article in the Albuquerque Journal that there are some people in the -- in the legislature that are opposed to the Energy Transition Act and they're also hearing scheduled. I think next week in the Senate -- in Cervantes Committee on the ETA. Can you sort of just bring us up to date with what their concerns are with the Energy Transition Act and what your thoughts are.

Yes, there is a group called powering the future, something like that, that's pretty small, it's composed of a few folks, they are kind of the -- kind of revised the coal industry and don't like some the environmental regulations and as you know, the main reason that San Juan Generating Station is shutting down is because of the compelling low natural price -- low natural gas and renewables. So we're not particularly concerned about any of that.

Great. And then has there been any reaction to the staff proposal that you adopt Carbon Capture technology at the San Juan plant.

I think the best reaction that I've seen one is in the write-up you had Paul about, and I think that summarizes it pretty well. There really has not been a lot of reaction to what everybody understands that this technology is not proven at scale, it's expensive. We looked at the technology back in 2010. As a matter of fact, and came to the same conclusions and we're updating the numbers on it now as we go through and file our resource plan. So really no reaction.

And then my last question would you need clarity on any of the issues before the NMPRC before going forward with equity or do you see the two, has not necessarily being linked right now?

Those are not linked, we don't need any other regulatory approvals.

Yes, no, no, I didn't mean Regulatory -- I'm talking about in terms of the spending dollars in New Mexico. So in other words, they're different options in terms of replacement power portfolio there is...

No, no. I think you said -- no if -- if you're suggesting we're timing in the equity around what decisions are made. I'd say no, because we have other pipeline projects that are needed for the business that they are -- they need to be prioritized and worked in, and so we need the equity to maintain our cap structure in our credit metrics and we'll plan it with some flexibility and timing to meet what we think is appropriate to provide shareholder value, but certainly it's not driven by those kinds of decisions.

Great, thank you very much.

Thanks, Paul.

Our next question comes from Greg Gordon with Evercore ISI. Please go ahead.

I already cook on a regular basis from my wife, so I don't need to have a special holiday for that.

Well, Congratulations to you. That's, yes, yes.

You shouldn't say that Greg, but you make us all look bad.

So look, I know that [Indecipherable] you're in a complex -- complicated situation here in New Mexico, the regulators seem to want to not follow the guidelines that the legislature and the governor has set for them. It sounds like the governor and the legislature also might be contemplating taking some action in the early next year With regard to that. So can you talk about what you're hearing from them and then -- in a worst-case scenario where, they did --the commission does in fact go against the structures of the law -- I mean, one way or another. You're going to move ahead with that's shutting down the plant and deploying the renewables. So what would be altered of the financing plan B?

Yes, Greg, I'll start with the first part of that, let Chuck talk about the second part. There is some discussion around the governance of the legislators of trying to do a couple of things. Maybe enact some PRC reform that they can do legislatively as opposed to anything that needs to be done constitutionally they aren't ready to go public with anything, but they are discussing that, there is also the discussion of making sure that there is legislation out that truly defines exactly what the qualifications for the commissioners will be how they are appointed so that -- the initiative comes on the ballot in 2020. It will be very clear to people how that's going to be structured and we think that would be very helpful to that resolution passing. Ultimately, if the Commission decides that they don't think that the Energy Transition Act applies as we said we would go to Supreme Court, because -- the question of whether or not the act applies turns on the timing of when the application that was filed in some parties that argued that when the commission bifurcated our consolidated application and put the abandonment and financing into a previously opened docket. A constitutional provision that it change in law cannot affecting pending case, province the new law firm being applied, that's really a miss application of that position and our position has been that since there was no application until July 1, the ETA applies to all parts of our consolidated filing, so we -- we would go back to the court on that and we're confident that the law does apply to it. So that's part, I'll let Chuck talk to you about.

Yes. So Greg, we don't like talking about another downside scenarios because it's -- to Pat's point, we feel very comfortable that we have the right position, but if you were thinking the sensitivities. Obviously, you think about securitization when apply so we'd have to issue additional capital debt and equity in order to support the reinvestment into the replacement power and if you look at the earnings power. We did show kind of a timing of some flexibility of how we would issue equity and we have other capital projects that we're prioritizing and considering. So there's a lot of different ways to think about achieving the earnings potential of the business and securitization, if it doesn't apply we will just address it -- the appropriate time, but we feel very strongly that our view is reflected well within our plans and we continue to think of it that way.

Thank you, guys. Take care.

Thanks, Greg. We're looking forward to report on what you made for dinner at EEI.

You can cut for all of us, Greg.

Our next question is a follow-up from Ali Agha. [Operator Instructions]

Thanks. Chuck, just one clarification. As you mentioned in your comments that you push back the New Mexico rate case from year-end to middle or sometimes in the second quarter of next year. How should we think about regulatory lag for 2020 as a result of that pushback.

Well, the effective date that we filed in December for the new rate case would have been January 2021. So we just look at the fact that if we file in early second quarter of 2020, then we'd have at a rate case effective in early second quarter of 2022 -- so 2021. So from our standpoint it's just timing and we don't think it's appropriate at this point, given all the focus we have on ETA and the replacement power in the pending cases we have with the commission that we need to pile on another rate case. So the timing of this is really -- judged more towards making sure that we allow for some early approach to our rate case planning.

Got you. So the impact will be temporary, but we'll see that in '21, just timing issue and then by '22, you should be back on the annual track.

Correct.

Correct, that's right.

Got you. Thank you.

You're welcome.

This concludes the question-and-answer session. I would like to turn the conference back over to Pat Vincent-Collawn, Chief Executive Officer. Please go ahead.

Thank you, Sara. And again, thank you all for joining us this morning. Enjoy making your dinner whether you make it for someone or your pets, please feel free to bring us pictures at EEI have a safe weekend and we will see you all at EEI. Thank you.

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