Good day and welcome to the PNM Resources First Quarter 2023 Conference Call. All participants will be in listen-only mode. 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 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 National Astronaut Day. 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 Endeavour. 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 a 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 Supreme Court 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 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 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 the 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 types 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 online 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 online this year, and we expect our generation capacity to reach 62% carbon-free at the end of this year. Next year, we plan to add another 500 megawatts of solar paired with 400 megawatts of battery storage. These final projects were approved to replace San Juan, along with our expired Palo Verde lease capacity. We are well on our way to meeting our goals for a clean energy transition, along with New Mexico's renewable portfolio standards and carbon-free mandates. In New Mexico, because of the Energy Transition Act, we are able to do this while keeping customer rates affordable, even during a period of high inflation. You can see this in our current rate review, which I'll talk more about in a few minutes. This week, we filed with the New Mexico Commission to add 12 megawatts of utility-owned battery storage at two existing PNM-owned solar facilities. At each of these locations, our current distribution feeders are overloaded from solar production. In the past, this would've required adding a new feeder or performing more costly upgrades to the feeders. We are proposing an alternative option to install 6 megawatts of battery capacity connected to our distribution system at each site. This matches the lowest-cost option for solving the overloaded feeders, plus it provides the benefits of adding battery storage capacity to our system. The battery accommodates more renewable energy, supporting our clean energy transition, and it also supports enhanced reliability and resilience. This alternative is one way that we are using available technology to provide new cost-efficient T&D solutions to meet evolving grid needs and reach our carbon-free goals. These proposed batteries are already part of our capital plan. We’ve asked for the commission decision before the end of the year and expect the facilities to be operational in June of next year. I also wanted to talk about our announced sale of NMRD. The 50-50 joint partnership was created in 2017 to allow us to compete in non-regulated space to provide renewable resources in New Mexico. Over the last six years, we’ve built a portfolio of 135 megawatts of contracted renewables with another 50 megawatts coming online this summer, along with other development opportunities. These renewable projects will continue to operate in New Mexico and support the state's clean energy goals. This portfolio is attractive in today's market. With the increased investment needed to support our regulated utilities, it makes sense to sell this portfolio and put the funds to work on the regulated side. We would expect to close the transaction by the end of the year. On slide 8, I'll walk you through recent updates on the key regulatory proceedings at PNM and TNMP. The New Mexico Supreme Court heard oral arguments at the end of March on our proposed abandonment and securitization of the Four Corners plant. We also completed hearings on our grid modernization application with the New Mexico Commission in March. As a reminder, we requested approval of our project plan by July but delayed the timing of our requested recovery until September, after the peak summer season. We anticipate the hearing examiner issuing a recommended decision in the coming months and a final order from the commission in the third quarter. Lastly at PNM, the hearings for our 2024 rate change were rescheduled from June to September. The overall suspension period had previously been expanded to the typical 13 months, and we anticipated the hearings would be moved accordingly. We continue to expect to implement new rates in January of 2024 with the projected impact to customer bills of less than 1%. The Western Energy Imbalance Market continues to be a program providing substantial cost reductions to customers. The annual savings to customers from EIM in 2022 totaled $35 million and the first quarter of 2023 has already provided another $22 million of customer benefits. These savings flow through to customers, and along with the clean energy transition, are keeping our rates reasonable and affordable. At TNMP, we expect to receive approval from our first 2023 transmission recovery filing this month, to recover an increased $150 million of rate base. We filed our annual distribution recovery filing at the beginning of April for another $157 million of rate base and expect rates to be implemented in September. We typically make our second transmission filing in July and also expect these rates to be implemented in September. With that, I'll turn it over to Lisa.

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 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 agreements 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 issuing 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. 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.

But if I could just ask two quick questions, Pat. One is, I think the extension right now for the transactions is until July 20th. And so, obviously it depends on when the Supreme Court remands 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 the quickest approval, and then something that maybe was more extended with hearings, 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 Supreme Court.

But then, if I could reword the question, do you believe that the current extension to July 20th is achievable right now from where you stand?

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

Perfect. And then, if I take another shot at the question, 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 what point would you make the decision to do the equity in 2023?

I'm going to — since I've used my witty repartee this morning, I'm going to let Don Tarry 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 to fund it that way too. What we put out there is $200 million by the end of the year and we’ve executed on $50 million of that. We will continue to look at those opportunities as they exist. 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. With that said, let me try this again. Let me hit a little more stale subject here. Just on NMRD here, obviously AEP talked 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's like the only place you have not been — outer space. So, you can come down here and buy a ticket on Virgin Galactic. Don, go ahead.

Hey. Good morning, Julien. On NMRD, currently we have an equity value of $100 million on those assets. 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? Maybe you can speak to that a little bit, the timing there, and any considerations around the deal?

Yes. Like I mentioned, we look at it to fund some of our capital program as we look forward, past 2023 and into 2024 and beyond. It's a great mechanism to be able to monetize and then utilize it on the regulated side of the business.

Got it. And speaking of the renewable investments, you said the 12 megawatts you're pursuing on the battery side — that seems like it would be owned by you. Can you talk about that?

No. Julien, it’s utility-owned. It's on the distribution side of the business. It really helps us accomplish several different non-wire opportunities that help us with grid resilience, helps with the solar saturation that exists, and provides capacity when you need it.

To what extent is this 12 megawatts perhaps a leading indicator of a broader strategy to have storage owned within utility infrastructure and rate base, especially considering regulatory changes?

We would see this as kind of a pilot program. There are other feeders that run into the same problem. We prioritized the feeders that had the biggest challenges. We 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. If I can close on this, I understand there's not much you want to say about July 20th, but just vis-à-vis your expectations on rehearing and process — anything you would offer up? There are several permutations that could materialize. To the extent the case is remanded, how do you see it playing out?

I think the first step is it's at the Supreme Court right now, and we need to wait for their decision. Their decision is not based on any timeline. Once it comes back, if remanded from the Supreme Court, we would expect those proceedings to be developed by the commission. We would expect input on due process from all the different parties in that case, and so it will work its way through.

And the same dynamic exists for Four Corners as well, right? There's no real ability to talk about that in tandem?

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

Okay, fair enough. Thank you, guys.

Thank you, Julien. 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. Both parties — AEP and us — found it a great opportunity to monetize and invest in our regulated side of the business. When you are in a JV, it's a partnership, and monetizing 100% of the JV is a lot better than monetizing only 50% for partners. I think that answers the question. We have a regulated business in Texas and one in New Mexico, and both are operating quite well. We don't see us monetizing any core regulated assets though.

Recognizing it's core to the business and there have been minority regulated utility sales in the marketplace, is that something you would consider 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 the '24 outlook? And how much better are you positioned on that front relative to plan?

Hi, Ryan. In terms of low growth at TNMP, we are within our guidance range that we put forth before. Going forward into '24, crypto is a large load, but from an earnings impact it's a much smaller impact. And remember, in the DCRA filing, you do update for load.

Great. Thanks for taking the questions.

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 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. Do you have any insight as to why the Supreme Court remand request is taking so long? It kind of seemed fairly straightforward, but does it have anything to do with new energy economy ex parte compliance?

No. I think it has more to do with the fact that the court really wants to focus on due process and making sure they thoughtfully consider this. If you look at where they have criticized the commission, it's about due process. If you saw the El Paso case that came back this week, they really criticized the commission for lack of due process. I think they want to make sure that they carefully consider everybody's filings and think about, when they remand it back, whether they remand it under a specific statute, et cetera. I think they recognize that the new energy economy is generally noisy, and they want to be thoughtful.

Sorry — you cut out there at the end…

Sorry. I think that the court recognizes that the new energy economy creates a lot of noise.

Any sense, like once the PRC hopefully has it back in its hands, how long it would take for them to maybe issue at least the procedural schedule?

I think they'll probably issue a procedural schedule relatively quickly to get things started. When the court issues the remand, you have to wait 15 days, but I think the procedural schedule will come quickly.

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

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

I appreciate you taking my questions today.

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

Real quick question on NMRD: is there an EBITDA number that you can share that you realized in 2022?

We haven't put out an 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.

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

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

And then, 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 to 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. 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.