Good day and welcome to the PNM Resources First Quarter 2023 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Lisa Goodman. Please go ahead.

Thank you, Jason, and thank you, everyone, for joining us this morning for the PNM Resources first quarter 2023 earnings 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 and CEO, Pat Vincent-Collawn; President and Chief Operating Officer; Don Tarry; and Senior Vice President and Chief Financial Officer, and Treasurer, Lisa Eden. 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 SEC. With that, I will turn the call over to Pat.

Thank you, Lisa. Good morning, everyone, and thank you for joining us today on National Astronaut Day. And National Astronaut Day is a special day here for us at PNM Resources. One of our Board of Directors, Sid Gutierrez, is the first U.S. born Hispanic astronaut and the first Hispanic space mission commander. He commanded the space shuttle, Endeavor. So I'm going to start on slide 4 this morning with our financial results and company updates. Ongoing earnings increased during the first quarter, compared to last year coming in at $0.55. We are affirming our guidance for 2023 with a continued focus on managing our standalone business. Lisa will cover the financials in more detail. For strategic update, let me start with our merger with AVANGRID. On March 8th, the New Mexico Public Regulation Commission joined the companies in requesting the New Mexico Supreme Court to dismiss and remand the case back to the commission. The court called for responses to our motion by April 7th. There was no deadline for the court to respond to our motion for remand, as the Supremes saying, “You can't hurry love”. If our motion is granted, the case is returned to the commission's jurisdiction. The companies would then need to file a motion for reconsideration to request the commission take up the case and establish a procedural schedule. This process could include input from other intervening parties in the case and assignment of a hearing examiner or it could be managed at the commission level. Last month, we agreed with AVANGRID to the three month extension included in our merger agreement. This additional time should provide clarity on the path forward and an expected timeframe for further regulatory proceedings. You may also have seen from AEP that we have begun a sales process for our 50-50 joint venture, New Mexico Renewable Development, or NMRD. This has not been a significant contributor of earnings within our corporate and other segment, but we have built an attractive portfolio of unregulated renewable assets and the sale proceeds will provide funding for our regulated investments. With that, I'm going to turn it over to Don.

Thank you, Pat, and good morning, everyone. I'll start on slide six with our load growth by service area. At PNM, load grew at 1.4%, in the first quarter compared to the prior year residential and commercial customers provided the growth this quarter, while our annual estimate continues to include and expect an albeit slower ramp-up from some of our larger industrial customers. New Mexico has experienced colder than normal temperatures in the first quarter, which were similar to the level of degree days experienced in first quarter of 2022. At TNMP, we continue to see demand-based growth from crypto mining customers that entered the market in the second half of 2022. We will continue to see these type of double-digit percentages year-over-year until we reach a comparable period in the third quarter. Otherwise, the first quarter is typically a low volume quarter in Texas, and we continue to expect growth this year across each part of our service territory. Milder temperatures in the first quarter of 2023 reduced customer usage compared to colder than normal temperatures in the first quarter of 2022. Now, turning to slide 7, I will cover a couple of our operational highlights for the quarter. This month is typically, when things start to heat up for the summer and this year, we are bringing on new resources at PNM to help meet our summer load needs. The Royal Energy Project is our first large scale battery storage facility and is one of the projects coming on line this year following the retirement of the San Juan Generating Station. The 150 megawatt storage facility will be available in May with another 20 megawatt facility following soon after. These batteries are connected to 350 megawatts of solar that will also come on line this year, and we…

Thank you, Don, and good morning, everyone. I'll start on slide 10 with a summary of the year-over-year changes in the first quarter earnings. Earnings per share in the first quarter of 2023 were $0.55 compared to $0.50 in the first quarter of 2022. At PNM, transmission margins continued to reflect higher system demand and higher market power prices seen during Q1, particularly in the colder months of January and February. Lower costs from our generation portfolio changes offset the regulatory lag associated with new investments over the last several years that are not yet in rates. TNMP also increased from higher transmission and distribution investments recovery. Usage was up at both PNM and TNMP due to load growth. As Don mentioned, at PNM, residential and commercial load drove our increase and weather for the quarter was similar to last year. At TNMP, higher load growth due to crypto mining customers was mostly offset by milder temperatures. These increases were partially offset by expenses at the utility for depreciation, property tax and interest associated with our new rate-based investments, along with increases to our planned O&M spending. Market performance on our decommissioning trust also reduced earnings in the first quarter compared to last year in addition to higher interest rates at corporate. Turning to slide 11, I'll provide an update on our assumptions for the rest of the year. We're affirming our 2023 guidance range of $2.65 to $2.75. Higher earnings in the first quarter were largely driven by the increase in transmission margins, which can fluctuate with market demand. We have also provided an updated quarterly earnings distribution, reflecting our expectations for the rest of the year. We entered into additional interest rate hedges for 2023 to lock in more favorable rates when yields fell in March. We added $150 million of swaps through September 2023, and now have a total of $1 billion dollars hedged through this period. We have also added swaps to 2024 for a total of $600 million to further reduce our variable interest rate exposure. We also took the next steps to be able to issue equity later this year by entering into forward sales agreement under our ATM program. We can settle these agreements later this year by issuing stock, or we can have the option for cash settlement without the issuing of shares. The current forward sales agreements reflect approximately $50 million of equity, equating to about 1 million shares. We will not see any dilution impact on EPS until those shares are actually issued later in the year. We have the ability to sell another $150 million under the ATM program to meet our equity needs for 2023, or we could consider accessing the market through more traditional means. Overall, we remain in a good financial position to support growing capital investment needs, and navigate the current interest rate environment to support our targeted 5% earnings growth. With that, I'll turn it back over to Pat.

Thanks, Lisa. Before I open it up for questions, I'd like to recognize our teams in New Mexico and Texas who are moving our utilities forward every day, completing projects to bring service to new and expanding customers, repairing equipment after spring windstorms, preparing for summer peak season, and bringing new programs to customers. Thank you all for everything you do. Jason, let's please open it up for questions.

Thank you. [Operator Instructions] Our first question comes from Anthony Crowdell from Mizuho. Please go ahead.

Good morning, team. Happy Astronaut Day.

Thank you. Good morning. Thank you.

Good morning.

Good morning.

Hey, well played with the hold music, “can’t hurry love” and also The Supremes, Supreme Court. It didn't go unnoticed. But if I could just ask two quick questions, Pat. One is, I think the extension right now for the transactions until July 20th. And so, obviously it depends on when the Supreme Court remains the case back. But if you thought of the bookends of once the case gets remanded back, the time that it could take if maybe there was a process that involves no hearings or with the quickest approval, and then something that maybe was more extended with hearing to something, what do those look like from a calendar perspective?

Anthony, right now, we are just focused on getting it back and then seeing what the commission does, because they can do this at their level alone without sending it to the hearing examiner. So, we are just going to wait and see what happens when we get it back from the Supremes.

But, then, if I could cheat and maybe reword the question. Do you believe that the current extension of the July 20th date is achievable right now from where you stand?

We are going to wait until we get it back from the Supremes. I'm not even going to change any word in my answer.

Perfect. And then, if I take another shot at the question, which -- just when you talk about a non-merger scenario, can I think of a non-merger scenario and a delayed approval of the same thing? Meaning, if the transaction is still viable, but it's maybe extended, at like -- what point would you make the decision to do the equity in 2023?

I’m going to -- since I’ve use my witty repartee this morning, I'm going to let Don Terry answer that.

Anthony, good morning. Happy Friday. We are focused on continuing to manage the business like it's a standalone business, and we will continue to operate it that way and continue fund it that way too. So, what we put out there is $200 million by the end of the year and we’ve executed on $50 million of that. And we will continue to look at those opportunities as they exist. But again, we are focused on managing and delivering the results that you would expect us to.

Great. Thanks for taking my question and I'll jump back in the queue.

Okay. Thanks, Anthony.

Our next question comes from Julien Dumoulin-Smith from Bank of America. Please go ahead.

Hey. Good morning, team. Thank you, guys. I'm surprised Anthony referenced the hold music instead of Cinco de Mayo Friday here. But with that said, let me try this again. Let me hit a little more stale subject here. Just on NMRD here, obviously AEP talked it about it as well. What's the current book value of that just where it stands today and what your sense of timeline? And then, related to that, as you talked about in your prepared remarks about issuing stock, is there any limitation within the pending deal on doing so? And any commentary about timeline to pursuing that given the asset sale here first?

Julien, before I turn it over to Don, I thought you'd like National Astronaut Day, because that is like the only place you have not been, is outer space. So, you can come down here and buy a ticket on Virgin Galactic. So, Don, go ahead.

Hey. Good morning, Julien. On NMRD, currently we have an equity value of $100 million on those assets. And I would tell you, we would expect a gain on that, based on what our anticipation in the market would be. We would expect it to close likely by the end of the year.

Got it. Okay. And then, considering where that comes out, that would probably drive your timing for any future equity needs? I mean, maybe you can speak to that a little bit, just the timing there, and then any considerations around the deal?

Yes. We would look at -- like I mentioned, when we kind of walked through it, we look at it to fund our -- some of our capital program as we look forward, past 2023 and into 2024 and beyond. So, I think that's the way to think about it is, it's a great mechanism to be able to monetize and be able to then utilize it in the regulated side of the business.

Got it. And speaking of the renewable investments that you guys have this fairly modestly sized, I think it was 12 megawatts you said that you're pursuing on the battery side. But that seems like it would be owned by you all. [Ph] Can you talk about -- sorry, go for it.

No. Julien, it’s utility owned. It's on the distribution side of the business. It really helps us accomplish several different -- and non-wire type of opportunity that helps us for grid resilience, helps us to the solar saturation that exists, helps us to overcome some of that as well too. And then it, it's capacity when you need it.

Indeed. In fact, if I can, I mean, to what extent is this 12 megawatts perhaps a leading indicator of having a broader strategy therein in having that owned within utility infrastructure and rate base, especially, considering a lot of the changes on the regulatory front.

We would see this as kind of a pilot program. There is other feeders that run into the same problem. We prioritize the feeders that had the biggest challenges and so forth. So, we would see this as an opportunity, as a non-wire solution to both provide capacity to our grid at a cost that's reasonable to customers on a going forward basis. So yes, we'll continue to explore that.

Excellent. And then, if I can close on this, look, I understand there's not much you want to say about July 20th, et cetera, and my pal -- tried. But just vis-à-vis your expectations on rehearing and process, right, emphasis on that word process. Anything that you would offer up? I mean, I suppose there's several different permutations that could materialize here. But to the extent of which that there is some sort of I use the word rehearing again, but you put -- you interject how you see this playing itself out to the extent to which -- or how you see it being remanded?

Yes. So, I think, Julien, the first step in the process is it's at the Supreme Court right now, and we need to wait for their decision. And I think that's -- their decision's not based on any timeline. And I think that's what alludes to Pat's trying to answer that book in question. I think once it comes back, if remanded from the Supreme Court, we would expect those proceedings -- and we don't want to get in front of the commission, we would expect those proceedings to be developed by the commission. And we would expect input on due process from all the different parties in that case. And so, it'll work its way through.

All right. Fair enough. And the same dynamic exists for the Four Corners as well, right? That's just out there pending and there's no real ability to talk about that in tandem?

Yes. We had oral arguments this quarter and in Four Corners, and now it's in the Supreme Court's area. And we'll wait for their ruling, and there is no timetable on their ruling as well, so.

Okay, fair enough. Thank you, guys.

Thank you, we’re looking forward -- let us know when you come to Spaceport.

Our next question comes from Ryan Levine from Citi. Please go ahead.

In terms of the asset sales strategy, why now and maybe more strategically, are there any other assets within your portfolio that could be monetized to offset capital, equity issuances in a non-deal scenario, as that's a possibility?

On NMRD, it's a joint venture. And so both parties found AEP, as you heard yesterday and us as well, is a great opportunity to monetize those and invest in our regulated side of the business. So, when you are in a JV, it's a partnership. And so, you both come to the decision the same way. And monetizing 100% of the JV is a lot better than monetizing 50% of the JV for partners. So, I think that kind of answers that question. I think when those are gone, really what we have is we have a regulated business, one in Texas and one in New Mexico. And both of them are operating quite well. So, we don't see us monetizing any assets though there. I mean, that's core to our business.

In recognizing it's core to the business, and there has been a lot of other kind of minority regulated utility sales in the marketplace. Is that something that you would consider as a way to help fund growth on a go forward basis, if the Courts and commission move against you?

Right now, we're under a merger agreement with AVANGRID and that's what we are focused on getting done. So that's where we are going.

Okay. And then back to the core business. In terms of the low growth forecast, you highlight the crypto demand. How material is that for '23 earnings or '24 outlook? And how much better are you positioned on that front relative to maybe plan?

So, -- Ryan, hi. This is Lisa. In terms of low growth at TNMP, we really are within our guidance range that we put forth before. And as you know, going forward on the '24 crypto is a large load. But from an earnings impact, it's a much smaller impact. And then remember, in the DCRA filing, you do update for load.

Great. Thanks for taking the questions.

[Operator Instructions] Our next question comes from Jonathan Reeder from Wells Fargo. Please go ahead.

Hey. Good morning, team. A lot of my questions are already answered. But I just wanted to be clear, the planned sale of NMRD, it doesn't displace then any of the $200 million of equity needs in '23 but rather just helps fund needs in '24 and beyond, is that accurate?

Yes, Jonathan. Our objective is still to issue up to $200 million this year. Even with that asset sale.

Okay, great. Just wondering, Pat, do you have any insight as to why the Supreme Court remain request is taking so long. I mean, it kind of seemed fairly straightforward to be honest, but does it have anything to do with new energy economies ex parte compliance?

No. I think it has more to do with this fact that the court really wants to focus on due process and making sure they’re thoughtfully consideration of this. I mean, if you look at where they have criticized the commission is about due process. And if you saw the El Paso case that came back this week, but they really criticized the commission for lack of due process. So, I think they want to make sure that, they carefully consider everybody's filings. And think about when they remand it back, do they remand it back under specific statute, et cetera, et cetera. So, I think they recognize that the new energy economy is in general noise.

Sorry. You cut out there at the end…

Sorry. I think that the court recognizes that the new energy economy is just noise.

Okay, great. And then, to kind of try to take another bite at the apple that others have. Any sense, like once the PRC hopefully has it back in its hands, like how long it would take for them to maybe issue at least the procedural schedule?

That one, I'll answer. I think, they'll probably issue a procedural schedule relatively quickly to get things started. Right? You have to, if the -- when the court issues the remand, you have to wait 15 days, but I think the procedural schedule will come quickly.

Okay. And then, I guess, based on having that schedule in hand, hopefully by the July 20th, kind of date, that's what the board will kind of look like when they consider whether or not to extend it further.

You can’t hurry love, Jonathan, or mergers.

All right. I appreciate you taking my questions today.

The next question comes from Paul Fremont from Mizuho. Please go ahead.

Paul, is there something you want to tell us?

Like what?

It said the next question was from Paul Fremont at Mizuho.

Well old habits die hard.

Okay. I just thought maybe you were going to break some news on our call.

No, no, Ladenburg. Real quick question on NMRD, is there an EBITDA number that you can share with us that they -- that you realized in 2022?

We haven't put out EBITDA number. There is net income associated with this, and it's $1.5 million. So, it's about a penny to the bottom line, Paul.

And then, I would add too, Paul, that there's six development sites as well that have opportunities as well too. So, it's kind of a whole package deal. So, it's the sites that are currently -- those that are under development and then there's some development sites as well.

And last year earnings did not reflect the additional 50 megawatts that's coming on this summer as well.

And then, the other question that I have is that you had previously had a settlement agreement in place in the merger proceedings in ‘22. If the Supreme Court were to remand the case back to the commission, would you seek to try and put a settlement agreement in place?

Paul, we're not going comment on that until we get it back from the court.

Great. That’s my only other question. Thanks.

Thank you, Paul.

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, Jason. And thank you all for joining us this morning. And please, as you have your Cinco de Mayo margaritas or beer, be safe. Talk to you all soon. Bye.

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