PNM 1Q2017 Earnings Note

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Market Price (4/28/2017): $37.25/share; ST-Target: $49/share; NIV: $80/share

Near-term regulatory catalyst should help drive stock

A settlement agreement is at hand in the 2018 GRC. Pursuantly, PNM and parties to agreement have filed for an extension. Draft IRP was filed and having gone through the document we wrote a Quick Note dated April 20, 2016. We’re generally on-board with closure of San Juan and Four Corners, and the migration towards renewables and natural gas. From our view, PNM is on-track and delivering on its upside potential. In view of more modest demographic growth assumptions going forward, PNM reduced expectations for its CAGR in rate base for 2016-2019 to about 5%-6% (was 5%-7%) and lowered its expectations for CAGR in earnings for 2016-2019 to roughly 7%-8% (was 7%-9%). Regardless, we maintain our outlook for CAGR in AEPS through 2019 of about 8.6%. Total capital spending estimate is some $1.7B (some $1,013MM of depreciation) through 2020. The next important development is the settlement agreement for the 2018 GRC and the IRP that has final filing date in mid-July 2017. Draft IRP was not much of a surprise and in-line with expectations, AMI installation final decision in May 2017, and TNMP GRC to be filed no later than September 2018.


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