Good day and welcome to the PNM Resources Third Quarter 2022 Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Lisa Goodman, Executive Director of Investor Relations. Lisa, please go ahead.

Thank you, Melys and thank you, everyone, for joining us this morning for the PNM Resources third quarter 2022 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, 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 the 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 both National Jersey Day and National Candy Day. We are all decked out in our jerseys today, eating our leftover Halloween candy with, of course, the exception of our General Counsel. But since it's also a lobby-lawyer day, we're going to let that slide. On Slide 4, I'll start with our financial results. Ongoing earnings increased in the third quarter over the prior year, bringing year-to-date ongoing earnings to $2.54. As a result, we are raising our guidance for 2022 ongoing earnings to a range of $2.63 to $2.68. We are maintaining our guidance for 2023 at a range of $2.60 to $2.75 based on the continued strength at the utilities, offset by higher interest rates. Lisa will walk through these numbers in more detail. In October, PNM filed its application for a big modernization plan to bring smart meters and other system upgrades to our customers. We asked for approval of our plan by next July and hearings have been scheduled for March. Don will talk more about our application. This quarter also brought us a step forward as we execute our plan to be emissions-free by 2040 with the retirement of our last unit of the San Juan Generating Station. This significantly reduces the amount of coal in PNM's generation to less than 10% and brings our portfolio to 55% carbon-free. I'd like to thank the teams at San Juan, who operated the plant safely and efficiently to continue serving our customers through one last summer. On the regulatory front, the New Mexico Commission had ordered us to begin providing rate credits associated with the retirement of San Juan. We appealed the order and requested a stay of the rate credit during the appeal. In September, the court responded with an emergency stay, stopping the credit and then earlier this week confirmed the stay will remain in place for the duration of the appeal. The New Mexico Public Regulation Commission is preparing to change in January to a new appointed commission. The nominating committee will present the governor with at least five names for appointment by November 14. The governor will select three commissioner appointees, who will begin their terms on January 1, 2023 and serve staggered terms of up to six years. These appointments will need to be confirmed by the Senate but commissioners will be able to begin acting in their roles while awaiting confirmation. Lastly, in our merger with Avangrid: as Tom Petty so beautifully sang, the waiting is the hardest part. There have been no procedural updates since our last call. We've requested the court to hear oral arguments and are waiting to see if the court grants that request. There is no requirement for the court to hear oral arguments or any time frame for their consideration. We estimate a 12- to 18-month process from our initial filing in January. Before I turn it over to Don, I will cover some quick highlights on ESG on Slide 5. As I've already mentioned, the shift out of San Juan significantly reduces the amount of coal in PNM's generation portfolio and marked significant progress in the full elimination of carbon emissions from our generation. Our first interim target was for a 60% reduction by 2025 and we have reached this target ahead of schedule, along with significant reduction in NOx and SO2—particularly important here in New Mexico. This closure also significantly reduces the majority of our freshwater consumption. We've also had a number of social highlights this quarter, as we were finally able to return to some community activities in New Mexico that haven't happened in person for some time. We volunteered company-wide for our annual day of service and also returned to hosting our Albuquerque community assistance fair. This is the largest of the PNM customer-assisted events held statewide throughout the year. And this one is particularly valued by our customers as we coordinate to bring together resources from the gas and water utilities and dozens of other organizations in the community in a single venue. Our employees coordinated and volunteered at the event and nearly 300 customers and families received over $100,000 in assistance. We've also taken part in activities within our own organization to learn and grow from each other. In recognition of Indigenous Peoples Day in October, we gathered to view a documentary about the recognition of Pueblo independence and the struggle for sovereignty by New Mexico's 19 Pueblos. We have these types of learning opportunities regularly to continue developing a mindset of diversity and a culture of inclusion. Native Americans are an important voice in our community. We integrate this mindset into our business decisions as well. We just issued an RFP this week for new resources and are specifically looking for proposals located on Navajo lands utilizing a best-in-class bid evaluation and shortlist selection to encourage more of these proposals. We value our business relationships with our tribal partners and look for opportunities to help this community thrive. With that, I will turn it over to Don for an operations and regulatory update.

Thank you, Pat and good morning, everyone. I'll start on Slide 7 with our load growth by service area with PNM first. The third quarter is typically our highest demand, and as temperatures soared in early July, PNM set a new system peak, our first since 2013. In terms of overall load, our growth has been coming in slightly lower than our original expectations. The primary driver of growth in our original guidance was from our industrial customers. Delays related to customer supply chain issues and other pressures have moved this timing out till next year. Residential and commercial load has done better than expectations for the year. With these overall shifts in load, we have reduced our 2022 retail load growth expectations to 0.5% to 1.5%. Looking ahead to 2023, our expectation is for industrial customers to move through their delays and get back to the original forecast of 2% to 3%. Economic development efforts in New Mexico have increased the number of continuing inquiries coming from companies looking to relocate or expand in our state, particularly from those who are looking to achieve their own clean energy goals. We play a key role in working with these companies to plan for their energy needs, and as a result, we anticipate growth in our system in the years to come. Load growth at TNMP has exceeded expectations across the board. Volumetric growth has been 2.8% year-to-date and we have increased our expectations for the year to a range of 2% to 3%. On demand-based load, usage from crypto-mining customers has pushed growth up to double-digit levels. Without crypto-mining usage, demand-based load has grown consistent with our expectations for the year of 2.5% to 3.5%. For this year, our demand-based load should come in around 14% to 16%. Weather was also a factor for TNMP in the third quarter. The quarter started out looking like it would set a new record for the hottest summer in Texas until a shift in weather pattern brought in some rain. The record for the hottest summer in Texas still belongs to 2011. TNMP's peak demand, however, has grown nearly 40% since 2011 and hit its most recent peak at the end of September. Now turning to Slide 8, I'll cover some operational highlights for PNM. As Pat mentioned, PNM filed its grid modernization plan with the commission in October. Legislation passed in 2020 encourages utility investments in grid infrastructure to meet the evolving needs of customers today and into the future. Our current infrastructure only provides one-way communication when monthly usage data is collected by meter readers. So our first priority in the plan is for smart meters and multi-directional communication. With these investments, customers will be able to gain insight into their own energy usage and make real-time decisions to impact their bills. PNM will also be able to improve service to our customers by using the real-time data to identify and respond to outages more quickly. Our proposed investment also supports the addition of both utility-scale and distributed renewable generation and storage resources which will be critical in PNM meeting the clean energy goals. Newer technology can also facilitate more demand response programs, something that has been requested by our commission. The $344 million plan was filed in early October and hearings are scheduled to begin March 20. We requested approval for our investment plan by July 1, with implementation for a rate rider beginning in September, which is after summer rates and when customer bills are lower. Year 1 of investments under the plan begins upon plan approval and the table on the slide shows how the $344 million is expected to break down by calendar year. I also wanted to highlight our FERC-regulated transmission business as we have been seeing strong earnings growth in this area. The Western Spirit contract began in December of last year and is providing $0.17 to $0.18 of increased earnings for us this year. This contract is a new transmission line, one of the only new lines constructed in New Mexico in decades. In addition to this contract, we've also seen higher overall system demand; resource constraints across the West have driven up market prices as well as demand for transmission to move energy across our grid. As power prices increase, we see greater interest in higher-frequency, short-term transmission purchases to meet specific needs at the lowest cost. As demand remains elevated across the West, we expect to see a corresponding level of transmission activity. On Slide 9, I will cover updates on our key regulatory proceedings. We've already covered this week's ruling from the New Mexico Supreme Court. We will be filing a PNM general rate review in December. Our last rate review was based on the 2018 test year with rates phased in over 2018 and 2019. We will file this review with the 2024 future test year, so there will be six years of rate base investments to recover. Our original plans to file rate cases in 2020 and 2021 were deferred because of COVID and the merger proceedings. The rate base additions in this case will show steady investments in transmission and distribution infrastructure to improve grid resilience, enhance reliability and support the transition to carbon-free resources. New substations, meters and power lines directly enhance service to our customers. The impact to our customers' rates of these investments will be significantly mitigated by the benefits of our transition out of coal and the lower-cost renewable resources coming online. In addition, PNM's participation in the Western Energy Imbalance Market provides offsets to fuel costs and this year has benefited customers $23 million through September. As a result, PNM's customer bills have remained well below the regional and national averages. Through July 2022, the average annual residential bill at PNM was $83 compared to our regional peers of $117. We'll share more details about our general rate review once we have submitted our application with the commission in December. At TNMP, we have implemented new distribution and transmission rates for timely recovery of over $225 million of new rate base investments. I'm going to turn things over to Lisa to walk through earnings impacts for the quarter and considerations for guidance going forward.

Thank you, Don, and good morning, everyone. Turning to Slide 11 with a summary of the changes in third quarter earnings compared to last year. As usual, the detailed drivers for each segment are available in the appendix. Earnings per share for the third quarter grew from $1.37 in 2021 to $1.46 in 2022. As Don mentioned, load and weather increased earnings this year, particularly in Texas, and the TCOS and DCOS rate mechanisms increased earnings on our capital investments at TNMP. Continued resource constraints in the West, increased market prices and FERC transmission demand at PNM in addition to earnings from the new Western Spirit transmission line also contributed to the increase. These increases were partially offset by depreciation expense on new investments across both utilities. At PNM, lower market performance on our decommissioning and reclamation trust reduced earnings compared to last year. These long-term trusts, along with our pension, remain well funded despite the challenging market conditions in 2022 and we don't anticipate making any cash contributions to these trusts in our current plan. Higher interest expense also reduced earnings and I will talk more about our financing plans in a few minutes. Slide 12 has our revised capital plan through 2025 of $3.7 billion. This investment plan continues to be focused on T&D infrastructure and meeting the growing needs of our customers across New Mexico and Texas. We have added $131 million for our grid modernization plan as part of PNM T&D along with an additional $100 million across the business to support investments in reliability and resiliency. We continue to monitor supply chain and inflation. Our partnership with our integrated supplier has mitigated impacts to our business. We have also taken steps to improve our equipment standardization, identify critical equipment and where possible, we have placed earlier orders for long lead-time equipment. We will continue to monitor these trends and look to manage any impact within our capital investment plan. Slide 13 shows the rate base associated with this investment plan grows 8% over 2020 levels. At PNM Retail, we continue our transition out of coal plant investments and the rate base remains stable over the period. The majority of growth in our plan comes from recovery of rate base attributed to PNM's FERC transmission operations and TNMP. The recovery mechanisms for these investments through deferred formula rates and the TCOS and DCOS mechanisms at TNMP allow for more timely recovery as these portions of our business expand. In addition, investments made associated with PNM's grid modernization program are expected to be recovered through a rate rider, resulting in approximately 5% to 7% of our rate base growth being recovered through formula rates, annual filings or riders. Slide 14 provides details around our financing plans. We have limited refinancing needs in the near term and have ample liquidity under our existing facilities. At PNM, the proceeds from securitization bonds next year will reduce the need for new debt to fund near-term capital investments. At TNMP, we have been accessing the capital market each year and these issuances will be included in future rate filings. Most of our variable-rate debt is associated with the term loan at our holding company that is planned to be transferred to Avangrid under the terms of the merger agreement at closing. In the meantime, we have taken steps to mitigate the impact of rising short-term interest rates. We now have $850 million hedged, fixing the variable rate portion of our debt at an average rate of 3.5% through 2023. Beyond 2023, we are focused on investing in the business while being mindful of customer impacts and maintaining investment-grade credit metrics across our business. Over a longer-term horizon, we would look to optimize our financing needs based on current market conditions as we have done in the past. As I've indicated before, we intend to implement an ATM program before year-end and you will see that filing come across shortly so that we have another tool available to meet future equity needs. Turning to Slide 15, I will wrap up with our forward-looking guidance. We are raising our guidance for 2022 based on the strength of earnings year-to-date and are projecting earnings per share in the range of $2.63 to $2.68. For 2023, we are maintaining our range of $2.60 to $2.75. We continue to expect strong growth at the utilities with load growth and rate-driver growth driven by FERC transmission and TNMP, and we'll see some offset from higher interest rates. We plan to provide our typical segment-level details and EPS drivers as part of our year-end call in February. We have a strong track record of delivering results and remaining flexible and adaptable to changing market conditions. We are continuing to target the 5% growth rate from 2020 to 2025 and our annual guidance shows that we are on track to achieve this target. We will continue to monitor changes in our environment and look for ways to offset impacts to customers and maintain our long-term objectives. With that, I'll turn it back over to Pat.

Thank you, Lisa. Before I open it up for questions — and please make sure you save some questions for us at EEI — I'd like to thank our crews in Texas who made their way to Florida to assist in the restoration efforts after Hurricane Ian. This type of assistance exemplifies the best of our company and the best of our industry as our partners get together to help customers. Melys, let's open it up for questions.

Our first question comes from Ryan Levine from Citi.

For the 2023 guidance that was maintained, can you walk us through what the impact was from the higher interest rates that were hedged that you highlighted in terms of the impact that was offset by other factors? And then load growth was very strong for your outlook for '22. You mentioned crypto demand. Are you seeing any drop-off in that demand into the fourth quarter and into next year? And then last question for me: in terms of the equity issuance that you highlighted, the pending filing of an ATM — do you anticipate utilizing any of that ahead of any decision around the pending merger?

Sure. Ryan, it's Pat. I can have Lisa answer that.

Yes, Ryan. So we have hedged $850 million of our variable-rate debt through 2023 at an average rate of 3.5%. We will provide more detailed EPS drivers on our year-end call in February. Regarding the ATM, we have identified up to $200 million of equity needs by the end of 2023. We intend to put an ATM in place to make sure that we have ample tools in the toolbox and flexibility to meet our needs over the next year. We will evaluate any potential issuance in the context of the merger process and our overall financing plan.

On crypto demand, we haven't seen any meaningful drop-off; it continues to be at that elevated level. As we consider 2023, we look at all factors associated with that. One of the key things is our core demand growth continues at that 2.5% to 3.5%, and crypto-related demand is on top of that.

Our next question comes from Jonathan Reeder from Wells Fargo.

For the appendix, it looks like above-normal weather year-to-date has been $0.11 favorable. Should we be thinking that weather is what really drives the midpoint-to-midpoint '22 guidance increase, whereas the higher non-weather-related demand is offsetting the interest expense headwind?

I think that's a good way to look at it. We saw the benefits of weather, and we also saw our FERC transmission business benefit due to constraints in the West. Strong utility performance at both TNMP and PNM have helped offset some of the corporate debt interest headwinds.

Okay. So then when we look at '23, that weather benefit goes away — in other words, you're kind of then starting back at normal weather and then your normal growth and the interest headwind is again offset by that core business strength, and that's how you're able to maintain the '23 range?

Yes. When we prepare guidance, we look to normal weather, and that is what we have anticipated for 2023. We feel comfortable with the range provided for 2023. We did have some weather upside this year, so you'll see growth be a little lower between 2022 and 2023 as a result.

Right. Okay. And then on the grid modernization application, can you remind us about the rate rider request? Is there a precedent for a grid mod rider in the state, or is this a novel request that might be challenged?

Yes, Jonathan, it's actually included in the legislation, so it provides that avenue to file a rider. The legislation provides that mechanism.

Okay. So assuming the commission upholds the legislation — that might be the question in New Mexico — but hopefully that will be a little clearer when the new commission is in place.

Yes, Jonathan. This will be heard in March; the hearings and decision will occur next year under the new commission.

Okay. And then is there any update on the appeal to the Supreme Court regarding the constitutionality of the amendment to move to an appointed commission?

Jonathan, there isn't any update on that. The Attorney General has filed and stated that they believe the appeal is without merit. So that is not something we are particularly worried about.

Okay. What is on the list that you worry about?

Well, I worry that my General Counsel is going to now try to eat all of my Halloween candy, so. Hopefully there are some snacks left — not the peanut-butter ones. There are absolutely no raisins here, Jonathan. So if you want to be nice at EEI, you can bring me some. I'll bring you some.

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

Thank you for the update. A couple of items: the grid modernization seems to have been reflected such that average rate base didn't see a material uptick for '23 and hence no change in '23 guidance — is that fair to characterize? Also on financing: you referenced the ATM and some equity needs. You've updated CapEx and rate base through 2025 — is there incremental equity to fund that, or is it still roughly the same? And how do you think about the ATM and other factors that may play into it? Finally, with the rate case timing, the grid mod filing and the backdrop of the merger process, how do you think about the parallel processes and timing across these items?

That's a fair way to characterize it, Julien.

Got it. On financing, just to clarify: you had some equity needs in the prior plan and you've updated CapEx and rate base through '25 — are you keeping the same equity needs assumption? And how should we think about the ATM as part of that plan?

Yes, Julien. We are keeping the same equity needs as previously defined. We have identified up to $200 million through 2023. Beyond that, we will optimize our financing plans based on market conditions. Our focus remains on reaching our earnings growth target of 5% from 2020 to 2025.

Regarding the rate case timing, grid mod filing and the merger review: can you talk about how these parallel processes will play out in '23 and whether they affect each other?

The grid modernization schedule is already set and will proceed along the normal administrative process for the commission. The rate case will be filed in December as agreed and will follow a normal schedule. Those two are on their normal paths and will not be delayed by the merger. The merger timeline is determined by the court and regulatory reviews; if the commission decides to revisit or the court process occurs, that timing is separate and not expected to interfere with the grid mod or rate case schedules.

Any updates on Western resource adequacy issues or the Inflation Reduction Act incentives and how they might affect your planning?

The team continues to work on resource advocacy and is making good progress; we'll have more of an update at year-end. Regarding the Inflation Reduction Act, it should be very helpful, but the rules haven't been finalized yet. With Treasury, the details matter, so until the final rules are published we won't be able to fully model its impacts, but we do view the legislation as potentially a game changer for clean energy deployment.

And this concludes our question-and-answer session. I would like to turn the conference back over to PNM's CEO, Pat Vincent-Collawn for closing remarks.

Thank you, Melys, and thank you again all of you for joining us this morning. We look forward to meeting with many of you at the EEI Financial Conference. Until then, if you haven't voted already, please do so, stay safe and always love your lawyer.

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