PNM 2017 IRP Quick Note

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Market Price (4/20/2017): $36.30/share; ST-Target: $45/share; NIV: $79/share

Draft Integrated Resources Plan (IRP) is mostly in-line w/expectations

  • We had called for the draft IRP to build a new combined-cycle gas turbine (CCGT) power plant to replace the San Juan Generating Station units 1&4 by the end of 2022 and to build renewable generation, including solar and wind to augment; we had also assumed the continuation of Palo Verde Nuclear Generating Station (PVNGS) ownership (288MW) and leases (114MW: 104MW expiring in 2023 and 10MW expiring in 2024)
  • The actual draft IRP calls for:
    • As expected SJGS 2&3 will shut-down by yearend 2017, and the draft IRP calls for closure of SJGS 1&4 (some 497MW) by June 30, 2022 when the current coal contract ends; this is in-line with our expectations; plan assumes PNM would be permitted to fully recover its remaining investment
      • Abandonment filing is required between July 1-and-December 31, 2018 with the NMPRC
    • Some combination of natural gas, solar and possibly additional wind projects would be utilized to offset the closure of SJGS and Four Corners
    • Energy storage projects could also be part of the energy supply mix
    • PNM may need to add new transmission capacity to the eastern parts of New Mexico where wind energy potentials are high, but transmission capacity is fully subscribed
  • We expect PNM to either renew the expiring PVNGS leases or outright buy the interests

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