TXNM Energy, Inc. Price & Performance (TXNM)

This has the effect of shifting the 2025 amounts previously categorized as financing into each of the utilities to align with our earnings guidance. From To provide additional transparency into our financing impacts, we're showing two separate lines. The existing financing line carries forward our 2025 holding company debt balance under a range of different financing alternatives. This line includes the impact the junior subordinated convertible bonds issued in 2024, along with the refinancing of the remaining term loan. The growth financing lines contemplates the cost of any new equity or debt issuances at the parent to fund our capital investment plan. A total of $1,300,000,000 of equity content is assumed across the five years with ranges to include varying amounts of or types of financing instruments. Taken together, these pieces add up 9% we are in our ability to achieve these targets and create value for shareholders. With that, I'll turn it back over to Pat. Thank you, Lisa. We have our shades on here in New Mexico in part because it is sunny here today but most importantly because 7% to 9% a pretty significant growth rate, highlighting the high level of growth we are seeing in Texas.

Before I open it up for questions, let me thank our teams across Texas and New Mexico for the wonderful accomplishments they achieved in 2024. I am looking forward to seeing what we can do in 2025. Ashia, let's open it up for questions. First question comes from Julian Doubling Smith. Please go ahead. Hey, good morning team.

Wow, you guys must be feeling pretty cool with those shades on I say, Hi, Julien, mine are little Martian shades, green and yellow. Courtesy of Roswell.

There we go. Very apropos to New Mexico indeed. Excellent. And kudos on the update here, very nicely done. One of only a handful moving their EPS CAGRs of late. So very good indeed. Maybe to follow-up on that in fact, as you think about what's in the plan and maybe the a couple of nuances here? Obviously, you provided some degree of updates here on IRP, but ultimately especially in the later dated portion of the plan. Can you speak a little bit to what the incremental opportunity is? Again, I just wanted to clarify what's not. And then also, I think you provided some additional commentary in the remarks here on the Permian. And the total $750,000,000 but how do you think about the different potential scenarios that could play out in May around that $750,000,000 and upside there as well as any related That's about five questions, Julian. We're going to try. What's the upside to the upside, Julia? No, absolutely. Let me talk a little bit about New Mexico first because I think that's helpful and then I'll jump to Texas. So in New Mexico, I mean it's a balance for us about portability and our CapEx plan, but there are two things that are happening in New Mexico that we're excited about.

And one of them is economic development legislation, which would allow us to pre build and that really benefits pre build CapEx infrastructure that we would need to serve larger customers. And that both benefits our existing customers based on rates and affordability in that arena. And it also benefits New Mexico as well. Second element is we did add our first transmission, small transmission aligned to in the capital plan. And as we look at New Mexico going forward, the opportunity to help existing customers is to remove some of those So there's going to be opportunities as we think in the latter part of the plan for continued transmission bill to unlock some of those constraints that we have there. And I think the third thing in New Mexico is you were in the midst of the 2029 to to RFP and that's the replacement of Four Corners would be in there. And again, we have to run through that process and don't want to get ahead of of that because it is governed by an independent evaluator, but there would be opportunity there. In the Texas side, we've added a significant amount of [indiscernible] Well. And I talked a little bit about the interconnections, 10% interconnection requests between 2023 and 2024.

And I'll tell you that's in every service area that we operate in. That's the Gulf, that's North Of Dallas. They're spread fairly evenly in West Texas. And it's interesting because we're seeing data center interest in each of those And both the residential and we're seeing significant data interconnection requests in both North Of Dallas as well as the Gulf Coast area. As we think about the play out of the Permian Basin, we're excited that we got the $750,000,000 I know we've added that into our plan. Again, $400,000,000 will be added in 02/1930 when we roll that out next year. I think the three forty five kv as well as the seven sixty five kV it looks like parties have filed and there's there's about 10 that are pro with the commission and about eight or nine that are against. We'll just have to wait and see how it plays out. As I mentioned, ERCOT has pushed pretty hard for this the larger [indiscernible] but we'll have to wait and see if that if it goes that route, we wouldn't expect any more capital out of that plan. If it goes to three forty five kV, we would see in the upwards of another $900,000,000 So that's kind of the landscape both in Texas and New Mexico as we think forward.

Got it. Yes, a lot of moving pieces there indeed. Still on the upside to the upside as you say. But sorry, in the more mundane sense though, just to come back to nitpicking on the commentary, for 25 financing activity, I think you said the remaining four fifty TXNM loan. What structure are you assuming there and just what's reflected in the updated Yes, Julian. So we're looking at replacing that term loans really desperate debt, right? And then include equity content to strengthen our credit metrics. So that's what we're looking to do.

Got it. All right. And that's reflected in some of that equity content is reflected in the updated EPS?

That's reflected in throughout the earnings period and we split out sort of existing financing. So the term loans are in included in that in existing financing line and then you have the growth financing and that's really the the equity and all the things that are associated with growing the investments and the growing capital budget that we have.

Wonderful. All right, guys. I'll let it be. Thank you so much. All right, all the best. See you guys soon. Our next question comes from Michael Lohnegan with Evercore ISI. Please go ahead.

Hi, good morning. Thanks for taking my questions. Good morning, Michael. Good morning. Good morning.

So in the Texas legislative session House Bill 2,868 was introduced. I know it's obviously early in the session, but as it stands now, it would require the PUC to use the utility's actual capital or the national average in determining rates So my question is when you file your Texas rate case towards the end of the year, what are you targeting for your actual capital structure going into the case? I don't want to hop in front of us filing the actual rate case, but we're very cognizant of the House Bill 2,868. So Okay, got it. And then in that rate case, there any key components or ticket items we should expecting aside from ROE and capital structure. Obviously, you you have the TCOS and DCRF mechanisms covering that capital, but anything in particular we should keep note of? You haven't had the rate case since 2018. As you had mentioned.

Yes. Given the mechanisms in Texas, the decost and decost, fairly close to earning our ROE. Every year. So it really be balancing between the distribution and transmission side of the businesses. And it's been we're starting our seventh year. So important to go in and allow that balance to happen.

Got it. Thank you.

Thank you. Have a good day.

Our next question comes from Anthony Codell with Mizuho.

Hey, good morning, team. Just one housekeeping question first. What was the song it was playing before the call started? Was it like an Eddie rabbit tune?

No, no, the future is so bright, you got to wear shades.

Who's the artist on that?

Let me check. Let me check.

That's fine. I could googled it. Excuse me, I wasn't familiar with it, but nicely done. I guess, Tim, that's three. Tim Buck three. I must have a box set somewhere in my house, the CD box set. I guess just quickly not to nitpick on Slide 15, you really lay out the earnings power potential I don't know if you want to give more clarity, but I think when you talk about the, say, the growth financing line, I just picked one of the years 2027, the $0.35 to $0.41 I think you talked about that's the range there is really different alternatives [indiscernible] equity financing, Could you just tell me what the bookends are? This would assume All equity or this will assume a different type of instrument Is there something like that that you would be willing to share? So Anthony, great to talk to you and great question. I think that when we look at the over the five year period, we put out that we're going to do $1,300,000,000 of equity in linked securities. And so what we included in this line is just a variety of ways of financing that, both from timing and using different security.

And really this line is trying to give you sort of guidance what that would look like. In executing on that equity plan.

I didn't do the math, but does this assume like linear like linear approach to issuing equity over the period or is there some lumpiness to your assumption of the $1,300,000,000 financing over the plan?

So Anthony, I mean capital is not even every year, which means that risk base is not even and then you have different clearings depending on if you have sort of quicker projects or more long term projects. Which means that also financing will also be evenly spread during that time period. So it's really matching your capital rate base with financing. Great.

And Lisa had asked me to make sure I asked Pat a couple of questions. So Pat, [indiscernible] I know you probably just want to talk about the company, but your other job, I think you're President of EEI I'm just curious industry's approach to maybe wildfire I mean, I guess my question would be, do you is there a buying with all the utilities where The wildfire sensitivity for your company may be may be more focused on some other utilities where maybe urban utility like a Con Edison or something may not be as focused on it. I'm just wondering, I'm wondering any where is GEI or where is the industry focused on maybe wildfire legislation or whatever at the federal level And is there support though across all the utilities for it?

I'll tell you what, Ethan, I would love to have that discussion with you, but I will have that offline.

Because wildfire is a complicated story and it is an EEI priority and utilities are aligned, but let's take that one we'll let Ms. Goodman set something up and I can wear my shades Okay. On The next question comes from Andrew Weisel Scotiabank. Please go ahead.

Hi, thanks Here in New York, we need to wear sunglasses because it's a little bit jealous. We're sorry.

First, one quick question to clarify for Don.

I think you mentioned something about mobile generation units in Texas. In your prepared remarks. Sorry if I missed it, but just to clarify, does the new CapEx plan include spending related to those tenth gen units or not?

No. We're going to wait till legislation works its way through and the rules were set and then legislate there's some legislation out there. So we'll wait until that happens make some decisions at that point.

Okay.

Thanks for clarifying.

And on the new CAGR, impressive number, certainly a good pickup there. I want to understand how should we think about the wider range at 200 basis points versus 100 previously?

That a function of the higher numbers or a reflection of regulatory uncertainty? Or how should we think about that?

I think, Andrew, that we've just we used to have a two percentage points and then we narrowed it and now it's a five year period. There's a lot of CapEx included in this budget. And so we were just comfortable with the 7% to 9% range. A little larger than we've had in the last year.

Okay. Then lastly for me on the dividend growth 5% increase Is that a good bogey for how we should be thinking about the next few years at least till you get to the middle the targeted 50% to 60%? And then once you get there, should we think about dividends eventually accelerating to match the pace of earnings? Or that not even a consideration at this point? No, the Board looks at it every year and there's a variety of factors and one of it is pace of earnings, it's our capital spending, etcetera, etcetera. So it can change during the year, but we just I think the biggest thing to keep in mind is we just targeted at the middle of that payout ratio. Some years it will be a little lower, some years it will be a little under, but the target is the middle.

Okay. So 5% It will change every year. It won't vary significantly. But it does it can vary by year.

Okay. Fair enough. Thank you very much, everyone. Thank you. Thank you. Have a good day. The next question comes from Ran Levine with Citi.

Please go ahead.

Good morning, everybody. Happy to be here Margarita Day. Given the history around 4 Corners and the comments made in the prepared remarks, curious if there's any color you could share around the timeline stakeholder engagement this quarter? As it relates to four quarters, it's Well, yes, and what type of solutions Any decision there may [indiscernible] We've committed to within our rate case and through our interveners that our plan is to exit Four Corners in 02/1931 when the operating is done and so forth. And that's that's why we've issued one of the reasons why we've issued the 29 to '32 RFP is a replacement to alternative for the Four Corners, our couple hundred megawatts that are there. Plus the additional growth that we expect I mean, just a follow-up for that. I mean, given all new generation being built in this country Are there any long lead time items that you need to take action this year or in the near term to be able to address that incremental generation in that Yes. Good question. And we issued the a lot sooner than we normally would for that specific reason. So have the results of that RFP internally.

By midyear and then as we work through it and so forth. So well in advance of what we normally would have issued the RFP on. And it's a broader window of that as well to you. And that's the whole reason why we did that process.

Okay. Thank you, Ryan.

This concludes our question and answer session. I would like to turn the conference back over to Pat Stinson Kolon for any closing remarks.

Thank you, and thank you all for joining us this morning. We hope you enjoy the eve of We'll see I'm sure many of you soon on the road. Thank you all. Bye bye.

The conference has now concluded. You may now disconnect.