PNM Resources Announces Third Quarter Results
PNM Resources (NYSE: PNM) today reported unaudited 2008 third quarter consolidated GAAP losses of $5.5 million, or $0.06 per diluted share, compared with earnings of $8.4 million, or $0.11 per diluted share, during the same period in 2007. Unaudited, consolidated quarterly ongoing earnings were $23.6 million, or $0.27 per diluted share, compared with earnings of $35.3 million, or $0.46 per diluted share in 2007. Reconciliations of GAAP to non-GAAP measures are shown in the attached schedules 1-12.
Quarterly earnings were affected by Hurricane Ike, which struck the Texas Gulf Coast on Sept. 13, 2008, and reduced sales volumes at First Choice Power and TNMP. The hurricane also depressed wholesale power prices and limited sales opportunities for EnergyCo. In addition, GAAP losses reflect a charge for the completion of the goodwill and intangible-asset impairment analysis at First Choice Power and a one-time write-off at EnergyCo related to its inventory balance of emission allowances under the Clean Air Interstate Rule. In July 2008, a federal appeals court invalidated CAIR.
“While our quarter-over-quarter results are lower, today we report financial results that demonstrate improvement in two key business areas,” said Jeff Sterba, PNM Resources chairman and CEO. “First, the PNM electric utility performance improved as a result of having a fuel clause in place and the implementation of new electric rates, which are the first steps of several designed to restore PNM back to financial health. Second, EnergyCo had a strong quarter, despite the lower power prices that were prevalent throughout Texas as a result of Ike. We expect EnergyCo to perform well moving forward, but we also expect power prices to be depressed well into 2009.
“On the regulatory front, we continue to make headway to ensure our utilities reach their earnings potential. As previously announced, we have filed rate cases for both PNM and TNMP, and we are progressing toward regulatory approval of the PNM gas operations sale,” Sterba said. In addition, we have permission from Texas regulators to seek recovery of Hurricane Ike repair costs – approximately $25 million to $30 million – in the current TNMP rate proceeding. On the other hand, First Choice Power continued to be affected by the fallout of gas-price volatility during the second quarter and bad-debt expense. Combined with the impact of Hurricane Ike, First Choice Power’s earnings remain below our expectations and last year’s performance.”
THIRD QUARTER PERFORMANCE SUMMARY
In Texas, Hurricane Ike decreased demand and depressed wholesale prices for much of September. Lower wholesale prices reduced opportunities for EnergyCo and resulted in First Choice Power selling excess power at prices lower than purchase prices. In addition, First Choice Power bad debt increased $6.4 million pre-tax compared with the same period in 2007.
Impairment charges recorded by First Choice Power and a write-off of emission allowances at EnergyCo increased PNM Resources consolidated GAAP losses by $16.9 million, after income-tax impacts, or $0.20 per diluted share.
PNM electric improved compared with 2007, due to the implementation of new base rates, which added $0.16 per diluted share, and implementation of a fuel adjustment clause, which offset higher fuel and purchase power costs. PNM’s baseload facilities performed as expected as those resources finished the quarter with a weighted-average equivalent availability factor of 87.2 percent, compared with 87.0 percent in 2007.
YEAR-TO-DATE PERFORMANCE SUMMARY
For the first nine months of 2008, PNM Resources reported unaudited consolidated GAAP losses of $197.6 million, or $2.42 per diluted share, compared with earnings of $58.3 million, or $0.75 per diluted share, during the same period in 2007. GAAP losses include non-cash impairment charges and a write off of emission allowances, which total $157.3 million, after income-tax impacts.
Year-to-date unaudited, consolidated ongoing earnings were $19.3 million, or $0.24 per diluted share, compared with earnings of $80.2 million, or $1.03 per diluted share, during the same period in 2007.
QUARTERLY SEGMENT REPORTING OF EARNINGS
Regulated Operations
PNM Electric – a vertically integrated electric utility in New Mexico with distribution, transmission and generation assets.
— PNM Electric reported ongoing earnings of $28.7 million, or $0.33 per diluted share, compared with ongoing 2007 earnings of $20.9 million, or $0.27 per diluted share. GAAP earnings were $15.8 million, or $0.18 per diluted share, compared with 2007 earnings of $1.4 million, or $0.02 per diluted share. 2007 GAAP earnings included an after-tax write-down of $11.8 million associated with the Afton Generating Station.
— The implementation of higher electric rates contributed to earnings. Fuel clause revenues offset higher fuel and purchase power costs used to serve jurisdictional load.
TNMP – a transmission and distribution company in Texas.
— TNMP reported ongoing earnings of $8.2 million, or $0.10 per diluted share, compared with $10.4 million, or $0.13 per diluted share, in 2007. GAAP earnings were $8.1 million, or $0.09 per diluted share, compared with 2007 earnings of $10.2 million, or $0.13 per diluted share.
— Reduced demand associated with Hurricane Ike and lower stranded cost revenue reflecting the Public Utility Commission of Texas’ final order on TNMP’s competitive transition costs negatively affected earnings and more than offset financing savings.
Unregulated Operations
First Choice Power – a competitive retail electric provider in the Electric Reliability Council of Texas.
— First Choice Power reported negative ongoing EBITDA of $3.3 million, compared with ongoing EBITDA of $11.8 million in 2007. Bad debt expense reduced EBITDA by $6.4 million and the impact of lower sales volumes and Hurricane Ike reduced EBITDA by $5.4 million, compared with the same period last year.
— First Choice Power had contracted to purchase power from Lehman Brothers Commodity Services, which filed bankruptcy in mid-September. Lehman’s default negatively affected First Choice’s ongoing EBITDA by $3.9 million. However, First Choice Power expects to offset most of those losses as a result of purchasing lower-priced replacement power during the fourth quarter.
— First Choice Power reported ongoing losses of $3.0 million, or $0.03 per diluted share, compared with earnings of $6.8 million, or $0.09 per diluted share, in 2007.
— GAAP losses were $16.5 million, or $0.19 per diluted share, compared with earnings of $2.7 million, or $0.04 per diluted share, in 2007. GAAP results reflect the completion of First Choice Power’s impairment analysis and recording of a non-cash impairment charge of $7.3 million, after income-tax impacts, which is in addition to the estimated impairment charge recorded in the second quarter. For the year, First Choice Power recorded after-tax impairment charges totaling $55.3 million.
— Quarterly average retail margins were approximately $16 per megawatt-hour, compared with approximately $18 per megawatt-hour in 2007.
EnergyCo – jointly owned by PNM Resources and a subsidiary of Cascade Investment, L.L.C., EnergyCo owns two generating assets – the coal-fired Twin Oaks Power facility and the natural gas-fired Altura Cogen facility – and is one of the developers of a fourth unit at the Cedar Bayou Generating Station
— PNM Resources’ share of EnergyCo’s ongoing EBITDA was $5.4 million, up from $1.7 million in 2007. EnergyCo had a power supply contract with Lehman Brothers Commodity Services. Since the Lehman commodity services’ default, EnergyCo has resold that power, and the net impact of the Lehman bankruptcy lowered PNM Resources’ share of EnergyCo EBITDA by $0.6 million.
— PNM Resources’ equity in ongoing net earnings of EnergyCo was $0.2 million, or $0.00 per diluted share, compared with earnings of $6.2 million, or $0.08 per diluted share, in 2007. PNM Resources’ equity in the GAAP net losses of EnergyCo was $0.9 million, or $0.01 per diluted share, compared with earnings of $6.4 million, or $0.08 per diluted share, in 2007.
— GAAP losses reflect the recording of a non-cash write-off related to EnergyCo’s inventory balance of emission allowances under the Clean Air Interstate Rule. PNM Resources’ share of the after-tax write-off is $9.6 million.
— For the quarter, Twin Oaks had an EAF of 95.1 percent and Altura Cogen produced an availability factor of 99.5 percent.
Corporate/Other – a business segment that reflects costs at the PNM Resources holding company, comprised mainly of interest expense related to certain short- and long-term debt and existing hybrid securities.
— Corporate/Other reported ongoing losses of $6.3 million, or $0.08 per diluted share, compared with losses of $5.9 million, or $0.07 per diluted share, in 2007. GAAP losses were $11.3 million, or $0.13 per diluted share, compared with losses of $9.1 million or $0.12 per diluted share, in 2007.
— Savings from lower short-term interest rates and borrowings were more than offset by the higher interest rates associated with the remarketing of equity-linked securities and higher short-term bank fees associated with credit downgrades.
Discontinued Operations
PNM Gas: a natural gas utility with distribution and transmission assets.
— PNM Gas reported ongoing losses of $4.2 million, or $0.05 per diluted share, compared with losses of $3.1 million, or $0.04 per diluted share, in 2007. PNM Gas reported GAAP losses of $0.6 million, or $0.00 per diluted share, compared with losses of $3.3 million, or $0.04 per diluted share, in 2007.
— Reduced usage and lower off-system activities drove the slight year-over-year decline.
2008 ONGOING EARNINGS GUIDANCE
PNM Resources today also affirmed its 2008 consolidated ongoing earnings guidance range of $0.13 to $0.28 per diluted share, including the adverse impacts of Hurricane Ike and First Choice Power’s year-to-date performance. Management expects results to be in the lower end of the range. However, the risk of falling below the range exists if fourth quarter performance at First Choice Power comes in below current projections due to deterioration in unit margins and/or increased bad debt resulting from higher default rates. Also, current projections assume normal weather in New Mexico.
THIRD QUARTER EARNINGS CALL: WEDNESDAY, NOV. 5, 2008 – 9 AM Eastern
PNM Resources will discuss third-quarter earnings results during a live conference call and Web cast Wednesday, Nov. 5, 2008, at 9 a.m. Eastern. Speaking on the call will be Jeff Sterba, PNM Resources chairman and CEO; Chuck Eldred, executive vice president and CFO; and Pat Vincent-Collawn, president and chief operating officer.
Investors, analysts and other participants can listen to the live conference call by dialing 877-718-5107 (toll free) or 719-325-4803 (toll) and referencing “the PNM Resources earnings call.” A telephone replay will be available at noon EDT until midnight Nov. 9 by dialing 888-203-1112 (toll free) or 719-457-0820 and using confirmation code 2254916. A live Web cast of the call will be available at http://www.pnmresources.com/investors/events.cfm.
Background:
PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with 2007 consolidated operating revenues from continuing and discontinued operations of $2.4 billion. Through its utility and energy subsidiaries, PNM Resources has more than 2,700 megawatts of generation resources and serves electricity to more than 859,000 homes and businesses in New Mexico and Texas and natural gas to more than 495,000 customers in New Mexico. The company also has a 50-percent ownership of EnergyCo, which owns approximately 920 megawatts of generation. For more information, visit www.PNMResources.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements made in this news release that relate to future events or PNMR’s, PNM’s, or TNMP’s (collectively, “Issuers”) expectations, projections, estimates, intentions, goals, targets and strategies, are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates and Issuers assume no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, Issuers caution readers not to place undue reliance on these statements. Issuers’ business, financial condition, cash flow and operating results are influenced by many factors (which are often beyond their control) that can cause actual results to differ from those expressed or implied by the forward-looking statements. These factors include conditions affecting the Issuers’ ability to access the financial markets, or EnergyCo’s access to additional debt financing following the utilization of its existing credit facility, including actions by ratings agencies affecting the Issuers’ credit ratings, the economic downturn, and current turmoil in the credit markets, state and federal regulatory and legislative decisions and actions, including the PNM and TNMP electric rate cases filed in 2008, the risk that the closing of the pending sale of the PNM natural gas utility may not occur due to regulatory or other reasons, the performance of generating units and transmission systems, including PVNGS, SJGS, Four Corners, and EnergyCo generating units, and transmission systems, the risk that EnergyCo is unable to identify and implement profitable acquisitions, including development of the Cedar Bayou IV Generating Station, or that PNMR and ECJV will not agree to make additional capital contributions to EnergyCo, the potential unavailability of cash from PNMR’s subsidiaries or EnergyCo due to regulatory, statutory or contractual restrictions, the impacts of the decline in the values of marketable equity securities on the trust funds maintained to provide pension and other postretirement benefits, including the levels of funding and expense, the outcome of any appeals of the PUCT order in the stranded cost true-up proceeding, the ability of First Choice to attract and retain customers, changes in ERCOT protocols, changes in the cost of power acquired by First Choice, collections experience, insurance coverage available for claims made in litigation, fluctuations in interest rates, weather, water supply, changes in fuel costs, the risk that PNM Electric may incur fuel and purchased power costs that exceed the cap allowed under its Emergency Fuel and Purchase Power Adjustment Clause, availability of fuel supplies, the effectiveness of risk management and commodity risk transactions, seasonality and other changes in supply and demand in the market for electric power, variability of wholesale power prices and natural gas prices, volatility and liquidity in the wholesale power markets and the natural gas markets, uncertainty regarding the ongoing validity of government programs for emission allowances, changes in the competitive environment in the electric and natural gas industries, the ability to secure long-term power sales, the risk that the Company and its subsidiaries and EnergyCo may have to commit to substantial capital investments and additional operating costs to comply with new environmental control requirements including possible future requirements to address concerns about global climate change, the risks associated with completion of generation, including pollution control equipment at SJGS, and the EnergyCo Cedar Bayou IV Generating Station, transmission, distribution, and other projects, including construction delays and unanticipated cost overruns, the outcome of legal proceedings, including pending appeals of PNM’s electric and gas rate cases and the Emergency FPPAC, changes in applicable accounting principles, and the performance of state, regional, and national economies.
Non-GAAP Financial Measures
PNM Resources (“the Company”) uses ongoing earnings, ongoing earnings per diluted share (or ongoing diluted earnings per share), EBITDA and ongoing EBITDA to evaluate the operations of the Company and to establish goals for management and employees. While the Company believes these financial measures are appropriate and useful for investors, they are not measures presented in accordance with generally accepted accounting principles in the U.S. (GAAP). The Company does not intend for these measures, or any piece of these measures, to represent any financial measure as defined by GAAP. Furthermore, the Company’s calculations of these measures as presented may or may not be comparable to similarly titled measures used by other companies.
PNM Resources Schedule 1 2008 Reconciliation of Ongoing to GAAP Earnings (Preliminary and Unaudited) Three Months Ended September 30, 2008 (in thousands) —————————————- Utilities —————————- PNM TNMP FCP Electric Electric PNM Gas —————————————- Ongoing Earnings (Loss) $ 28,650 $8,235 $(4,184) $ (3,015) —————————————- Non-Recurring Items —————————————- Acquisition/Divestiture (339) – (4) – —————————————- Business Improvement Plan (116) (142) (68) – —————————————- Economic mark-to-market hedges (9,378) – 342 (6,287) —————————————- Depreciation on gas assets – – 3,276 – —————————————- Impairment of intangible assets – – – (7,316) —————————————- Speculative trading – – – 82 —————————————- Unrealized impairments of NDT securities (3,015) – – – —————————————- Write-off of emissions allowances —————————– —————————————- Total Non-Recurring Items (12,848) (142) 3,546 (13,521) —————————————- GAAP Earnings (Loss) from Continuing Operations 15,802 8,093 (16,536) GAAP Earnings (Loss) from Discontinued Operations (638) ———————————————————————- GAAP Net Earnings (Loss) $ 15,802 $8,093 $ (638) $(16,536) ======================================== Three Months Ended September 30, 2008 (in thousands) —————————— EnergyCo Corp/ – (50%) Other PNMR —————————— Ongoing Earnings (Loss) $ 242 $ (6,287) $ 23,641 —————————— Non-Recurring Items —————————— Acquisition/Divestiture – (3,055) (3,398) —————————— Business Improvement Plan – (1,966) (2,292) —————————— Economic mark-to-market hedges 8,543 – (6,780) —————————— Depreciation on gas assets – – 3,276 —————————— Impairment of intangible assets (97) – (7,413) —————————— Speculative trading 1 – 83 —————————— Unrealized impairments of NDT securities – – (3,015) —————————— Write-off of emissions allowances (9,587) (9,587) ————————————— —————————— Total Non-Recurring Items (1,140) (5,021) (29,126) —————————— GAAP Earnings (Loss) from Continuing Operations (898) (11,308) (4,847) GAAP Earnings (Loss) from Discontinued Operations (638) ———————————————————————- GAAP Net Earnings (Loss) $ (898) $(11,308) $ (5,485) ============================== Ongoing earnings include earnings from discontinued operations and exclude the impact of non-recurring items and net unrealized mark-to- market gains and losses on economic hedges. Ongoing earnings also exclude gains and losses from speculative trading activity and unrealized losses recorded as impairments of assets held in the Nuclear Decommissioning Trust.
PNM Resources Schedule 2 2008 Reconciliation of Ongoing to GAAP Earnings (Preliminary and Unaudited) Nine Months Ended September 30, 2008 (in thousands) —————————————– Utilities —————————- FCP PNM TNMP Electric Electric PNM Gas —————————————– Ongoing Earnings (Loss) $ 18,261 $ 17,643 $14,993 $ (13,871) —————————————– Non-Recurring Items Acquisition/Divestiture (339) – (9) – —————————————– Afton writedown (1,199) – – – —————————————– Business Improvement Plan 171 (146) (143) – —————————————– Depreciation on gas assets – – 9,705 – —————————————– Economic mark-to-market hedges (3,016) – 70 (446) —————————————– FIN 48 Interest (1,922) 29 6 66 —————————————– Gain on sale of merchant portfolio 3,083 – – – —————————————– Impairment of intangible assets (51,143) (34,456) – (55,317) —————————————– Regulatory disallowances (18,273) – – – —————————————– Speculative trading – – – (31,452) —————————————– Unrealized impairments of NDT securities (4,070) – – – —————————————– Write-off of emissions allowances —————————- —————————————– Total Non-Recurring Items (76,708) (34,573) 9,629 (87,149) —————————————– GAAP Earnings (Loss) from Continuing Operations (58,447) (16,930) (101,020) GAAP Earnings (Loss) from Discontinued Operations 24,622 ———————————————————————- GAAP Net Earnings (Loss) $(58,447) $(16,930) $24,622 $(101,020) ========================================= Nine Months Ended September 30, 2008 (in thousands) ——————————- EnergyCo Corp/ – (50%) Other PNMR ——————————- Ongoing Earnings (Loss) $ 2,783 $(20,489) $ 19,320 ——————————- Non-Recurring Items Acquisition/Divestiture – (3,348) (3,696) ——————————- Afton writedown – – (1,199) ——————————- Business Improvement Plan – (4,434) (4,552) ——————————- Depreciation on gas assets – – 9,705 ——————————- Economic mark-to-market hedges (3,247) – (6,639) ——————————- FIN 48 Interest – 12 (1,809) ——————————- Gain on sale of merchant portfolio – – 3,083 ——————————- Impairment of intangible assets (6,784) – (147,700) ——————————- Regulatory disallowances – – (18,273) ——————————- Speculative trading (739) – (32,191) ——————————- Unrealized impairments of NDT securities – – (4,070) ——————————- Write-off of emissions allowances (9,587) (9,587) ———————————————————————- Total Non-Recurring Items (20,357) (7,770) (216,928) ——————————- GAAP Earnings (Loss) from Continuing Operations (17,574) (28,259) (222,230) GAAP Earnings (Loss) from Discontinued Operations 24,622 ———————————————————————- GAAP Net Earnings (Loss) $(17,574) $(28,259) $(197,608) =============================== Ongoing earnings include earnings from discontinued operations and exclude the impact of non-recurring items and net unrealized mark-to- market gains and losses on economic hedges. Ongoing earnings also exclude gains and losses from speculative trading activity and unrealized losses recorded as impairments of assets held in the Nuclear Decommissioning Trust.
PNM Resources Schedule 3 2007 Reconciliation of Ongoing to GAAP Earnings (Preliminary and Unaudited) Three Months Ended September 30, 2007 (in thousands) ——————————————— Utilities ————————— Altura FCP PNM TNMP Electric Electric PNM Gas ——————————————— Ongoing Earnings (Loss) $ 20,934 $10,421 $(3,102) $- $ 6,802 ——————————————— Non-Recurring Items Afton Write-Down (11,780) – – – – ——————————————— Business Improvement Plan (4,186) (193) – – – ——————————————— Economic mark-to- market hedges (5,187) (162) – (416) ——————————————— Sale of Turbine 1,678 – – – – ——————————————— Speculative trading – – – – (3,641) ——————————————— Unrealized impairments of NDT securities (85) – – – – ———————— ——————————————— Total Non-Recurring Items (19,560) (193) (162) – (4,057) ——————————————— GAAP Earnings (Loss) from Continuing Operations 1,374 10,228 – 2,745 GAAP Earnings (Loss) from Discontinued Operations (3,264) ———————————————————————- GAAP Net Earnings (Loss) $ 1,374 $10,228 $(3,264) $- $ 2,745 ============================================= Three Months Ended September 30, 2007 (in thousands) —————————- EnergyCo Corp/ – (50%) Other PNMR —————————- Ongoing Earnings (Loss) $6,153 $(5,865) $ 35,343 —————————- Non-Recurring Items Afton Write-Down – – (11,780) —————————- Business Improvement Plan – (3,227) (7,606) —————————- Economic mark-to-market hedges 94 – (5,671) —————————- Sale of Turbine – – 1,678 —————————- Speculative trading 134 – (3,507) —————————- Unrealized impairments of NDT securities – – (85) —————————————– —————————- Total Non-Recurring Items 228 (3,227) (26,971) —————————- GAAP Earnings (Loss) from Continuing Operations 6,381 (9,092) 11,636 GAAP Earnings (Loss) from Discontinued Operations (3,264) ———————————————————————- GAAP Net Earnings (Loss) $6,381 $(9,092) $ 8,372 ============================ Ongoing earnings include earnings from discontinued operations and exclude the impact of non-recurring items and net unrealized mark-to- market gains and losses on economic hedges. Ongoing earnings also exclude gains and losses from speculative trading activity and unrealized losses recorded as impairments of assets held in the Nuclear Decommissioning Trust.
PNM Resources Schedule 4 2007 Reconciliation of Ongoing to GAAP Earnings (Preliminary and Unaudited) Nine Months Ended September 30, 2007 (in thousands) ——————————————— Utilities ————————– Altura FCP PNM TNMP Electric Electric PNM Gas ——————————————— Ongoing Earnings (Loss) $ 40,136 $15,593 $9,511 $5,983 $ 19,220 ——————————————— Non-Recurring Items Afton Write-Down (11,780) – – – – ——————————————— Business Improvement Plan (4,186) (193) – – – ——————————————— Economic mark-to- market hedges (9,311) – 160 – 489 ——————————————— Favorable Tax Decision – – – – – ——————————————— JV Formation Costs – – – – – ——————————————— Loss on Altura Contribution – – – – – ——————————————— Sale of Turbine 1,678 – – – – ——————————————— Speculative trading – – – – (4,715) ——————————————— Twin Oaks III Impairment – – – – – ——————————————— Unrealized impairments of NDT securities (293) – – – – ———————— ——————————————— Total Non- Recurring Items (23,892) (193) 160 – (4,226) ——————————————— GAAP Earnings (Loss) from Continuing Operations 16,244 15,400 5,983 14,994 GAAP Earnings (Loss) from Discontinued Operations 9,671 ———————— ——————————————— GAAP Net Earnings (Loss) $ 16,244 $15,400 $9,671 $5,983 $14,994 ============================================= Nine Months Ended September 30, 2007 (in thousands) ———————————— EnergyCo Corp/ ——- (50%) Other PNMR ———————————— Ongoing Earnings (Loss) $7,125 $(17,391) $ 80,177 ———————————— Non-Recurring Items Afton Write-Down – – (11,780) ———————————— Business Improvement Plan – (3,229) (7,608) ———————————— Economic mark-to-market hedges 94 – (8,568) ———————————— Favorable Tax Decision – 16,038 16,038 ———————————— JV Formation Costs – (2,543) (2,543) ———————————— Loss on Altura Contribution – (2,197) (2,197) ———————————— Sale of Turbine – – 1,678 ———————————— Speculative trading 130 – (4,585) ———————————— Twin Oaks III Impairment – (2,042) (2,042) ———————————— Unrealized impairments of NDT securities – – (293) ——————————— ———————————— Total Non-Recurring Items 224 6,027 (21,900) ———————————— GAAP Earnings (Loss) from Continuing Operations 7,349 (11,364) 48,606 GAAP Earnings (Loss) from Discontinued Operations 9,671 ——————————— ———————————— GAAP Net Earnings (Loss) $7,349 $(11,364) $ 58,277 ==================================== Ongoing earnings include earnings from discontinued operations and exclude the impact of non-recurring items and net unrealized mark-to- market gains and losses on economic hedges. Ongoing earnings also exclude gains and losses from speculative trading activity and unrealized losses recorded as impairments of assets held in the Nuclear Decommissioning Trust.
PNM Resources Schedule 5: 2008 Reconciliation of Ongoing to GAAP Earnings Per Share (Preliminary and Unaudited) Three Months Ended September 30, 2008 ————————————- Utilities ————————— FCP PNM TNMP Electric Electric PNM Gas ————————————- Ongoing Earnings (Loss) $ 0.33 $ 0.10 $(0.05) $(0.03) ————————————- Non-Recurring Items Acquisition/Divestiture 0.00 – 0.00 – ————————————- Business Improvement Plan 0.00 (0.01) 0.00 – ————————————- Economic mark-to-market hedges (0.11) – 0.00 (0.07) ————————————- Depreciation on gas assets – – 0.05 – ————————————- Impairment of intangible assets – – – (0.09) ————————————- Speculative trading – – – 0.00 ————————————- Unrealized impairments of NDT securities (0.04) – – – ————————————- Write-off of emissions allowances ——————————– ——— ——— ——- ——- Total Non-Recurring Items (0.15) (0.01) 0.05 (0.16) ————————————- GAAP Earnings (Loss) from Continuing Operations 0.18 0.09 (0.19) GAAP Earnings (Loss) from Discontinued Operations 0.00 ——————————– ————————————- GAAP Net Earnings (Loss) $ 0.18 $ 0.09 $ 0.00 $(0.19) ===================================== Average Shares Outstanding (Basic and Diluted): 86,408,035 Three Months Ended September 30, 2008 ————————- EnergyCo Corp/ – (50%) Other PNMR ————————- Ongoing Earnings (Loss) $ – $(0.08) $ 0.27 ————————- Non-Recurring Items Acquisition/Divestiture – (0.04) (0.04) ————————- Business Improvement Plan – (0.01) (0.02) ————————- Economic mark-to-market hedges 0.10 – (0.08) ————————- Depreciation on gas assets – – 0.05 ————————- Impairment of intangible assets – – (0.09) ————————- Speculative trading 0.00 – 0.00 ————————- Unrealized impairments of NDT securities – – (0.04) ————————- Write-off of emissions allowances (0.11) (0.11) ——————————————– ——— ——- ——- Total Non-Recurring Items (0.01) (0.05) (0.33) ————————- GAAP Earnings (Loss) from Continuing Operations (0.01) (0.13) (0.06) GAAP Earnings (Loss) from Discontinued Operations 0.00 ——————————————– ————————- GAAP Net Earnings (Loss) $(0.01) $(0.13) $(0.06) ========================= Average Shares Outstanding (Basic and Diluted): 86,408,035 Ongoing earnings include earnings from discontinued operations and exclude the impact of non-recurring items and net unrealized mark-to- market gains and losses on economic hedges. Ongoing earnings also exclude gains and losses from speculative trading activity and unrealized losses recorded as impairments of assets held in the Nuclear Decommissioning Trust.
PNM Resources Schedule 6: 2008 Reconciliation of Ongoing to GAAP Earnings Per Share (Preliminary and Unaudited) Nine Months Ended September 30, 2008 ———————————- Utilities ————————- FCP – PNM TNMP PNM Electric Electric Gas ———————————- Ongoing Earnings (Loss) $ 0.22 $ 0.22 $0.18 $(0.17) ———————————- Non-Recurring Items Acquisition/Divestiture – – 0.00 – ———————————- Afton writedown (0.02) – – – ———————————- Business Improvement Plan – – 0.00 – ———————————- Depreciation on gas assets – – 0.12 – ———————————- Economic mark-to-market hedges (0.04) – 0.00 (0.01) ———————————- FIN 48 Interest (0.02) – 0.00 – ———————————- Gain on sale of merchant portfolio 0.04 – – – ———————————- Impairment of intangible assets (0.63) (0.43) – (0.68) ———————————- Regulatory disallowances (0.22) – – – ———————————- Speculative trading – – – (0.38) ———————————- Unrealized impairments of NDT securities (0.05) – – – ———————————- Write-off of emissions allowances ———————————– ———————————- Total Non-Recurring Items (0.94) (0.43) 0.12 (1.07) ———————————- GAAP Earnings (Loss) from Continuing Operations (0.72) (0.21) (1.24) GAAP Earnings (Loss) from Discontinued Operations 0.30 ———————————– ———————————- GAAP Net Earnings (Loss) $(0.72) $(0.21) $0.30 $(1.24) ================================== Average Shares Outstanding (Basic and Diluted): 81,669,330 Nine Months Ended September 30, 2008 ————————– EnergyCo Corp/ (50%) Other PNMR ————————– Ongoing Earnings (Loss) $ 0.03 $(0.24) $ 0.24 ————————– Non-Recurring Items Acquisition/Divestiture – (0.04) (0.04) ————————– Afton writedown – – (0.02) ————————– Business Improvement Plan – (0.05) (0.05) ————————– Depreciation on gas assets – – 0.12 ————————– Economic mark-to-market hedges (0.04) – (0.09) ————————– FIN 48 Interest – – (0.02) ————————– Gain on sale of merchant portfolio – – 0.04 ————————– Impairment of intangible assets (0.09) – (1.83) ————————– Regulatory disallowances – – (0.22) ————————– Speculative trading (0.01) – (0.39) ————————– Unrealized impairments of NDT securities – – (0.05) ————————– Write-off of emissions allowances (0.11) (0.11) ——————————————- ————————– Total Non-Recurring Items (0.25) (0.09) (2.66) ————————– GAAP Earnings (Loss) from Continuing Operations (0.22) (0.33) (2.72) GAAP Earnings (Loss) from Discontinued Operations 0.30 ——————————————- ————————– GAAP Net Earnings (Loss) $(0.22) $(0.33) $(2.42) ========================== Average Shares Outstanding (Basic and Diluted): 81,669,330 Ongoing earnings include earnings from discontinued operations and exclude the impact of non-recurring items and net unrealized mark-to- market gains and losses on economic hedges. Ongoing earnings also exclude gains and losses from speculative trading activity and unrealized losses recorded as impairments of assets held in the Nuclear Decommissioning Trust.
PNM Resources Schedule 7: 2007 Reconciliation of Ongoing to GAAP Earnings Per Share (Preliminary and Unaudited) Three Months Ended September 30, 2007 ——————————————– Utilities ————————— Altura FCP PNM TNMP Electric Electric PNM Gas ——————————————– Ongoing Earnings (Loss) $ 0.27 $ 0.13 $(0.04) $- $ 0.09 ——————————————– Non-Recurring Items Afton Write-Down (0.15) – – – – ——————————————– Business Improvement Plan (0.05) (0.00) – – – ——————————————– Economic mark-to-market hedges (0.07) – (0.00) – 0.00 ——————————————– Sale of Turbine 0.02 – – – – ——————————————– Speculative trading – – – – (0.05) ——————————————– Unrealized impairments of NDT securities 0.00 – – – – ——————————————– Total Non-Recurring Items (0.25) (0.00) (0.00) – (0.05) ——————————————– GAAP Earnings (Loss) from Continuing Operations 0.02 0.13 – 0.04 GAAP Earnings (Loss) from Discontinued Operations (0.04) ————————- ——————————————– GAAP Net Earnings (Loss) $ 0.02 $ 0.13 $(0.04) $- $ 0.04 ============================================ Average Diluted Shares Outstanding: 77,561,189 Three Months Ended September 30, 2007 ————————- EnergyCo Corp/ – (50%) Other PNMR ————————- Ongoing Earnings (Loss) $0.08 $(0.07) $ 0.46 ————————- Non-Recurring Items Afton Write-Down – – (0.15) ————————- Business Improvement Plan – (0.05) (0.10) ————————- Economic mark-to-market hedges 0.00 – (0.07) ————————- Sale of Turbine – – 0.02 ————————- Speculative trading 0.00 – (0.05) ————————- Unrealized impairments of NDT securities – – 0.00 ————————- Total Non-Recurring Items 0.00 (0.05) (0.35) ————————- GAAP Earnings (Loss) from Continuing Operations 0.08 (0.12) 0.15 GAAP Earnings (Loss) from Discontinued Operations (0.04) ——————————————– ————————- GAAP Net Earnings (Loss) $0.08 $(0.12) $ 0.11 ========================= Average Diluted Shares Outstanding: 77,561,189 Ongoing earnings include earnings from discontinued operations and exclude the impact of non-recurring items and net unrealized mark-to- market gains and losses on economic hedges. Ongoing earnings also exclude gains and losses from speculative trading activity and unrealized losses recorded as impairments of assets held in the Nuclear Decommissioning Trust.
PNM Resources Schedule 8: 2007 Reconciliation of Ongoing to GAAP Earnings Per Share (Preliminary and Unaudited) Nine Months Ended September 30, 2007 —————————————– Utilities ————————- Altura FCP PNM TNMP PNM Electric Electric Gas —————————————– Ongoing Earnings (Loss) $0.51 $0.20 $0.12 $0.08 $0.25 ——— ——— —– —— —— Non-Recurring Items Afton Write-Down (0.15) – – – – —————————————– Business Improvement Plan (0.05) 0.00 – – – —————————————– Economic mark-to-market hedges (0.12) – 0.00 – 0.01 —————————————– Favorable Tax Decision – – – – – —————————————– JV Formation Costs – – – – – —————————————– Loss on Altura Contribution – – – – – —————————————– Sale of Turbine 0.02 – – – – —————————————– Speculative trading – – – – (0.07) —————————————– Twin Oaks III Impairment – – – – – —————————————– Unrealized impairments of NDT securities 0.00 – – – – —————————————– Total Non-Recurring Items (0.30) 0.00 0.00 – (0.06) —————————————– GAAP Earnings (Loss) from Continuing Operations 0.21 0.20 0.08 0.19 GAAP Earnings (Loss) from Discontinued Operations 0.12 —————————- —————————————– GAAP Net Earnings (Loss) $0.21 $0.20 $0.12 $0.08 $0.19 ========================================= Average Diluted Shares Outstanding: 78,151,325 Nine Months Ended September 30, 2007 ———————— EnergyCo Corp/ – (50%) Other PNMR ———————— Ongoing Earnings (Loss) $0.09 $(0.22) $1.03 ——— ——- —— Non-Recurring Items Afton Write-Down – – (0.15) ———————— Business Improvement Plan – (0.05) (0.10) ———————— Economic mark-to-market hedges 0.00 – (0.11) ———————— Favorable Tax Decision – 0.21 0.21 ———————— JV Formation Costs – (0.03) (0.03) ———————— Loss on Altura Contribution – (0.03) (0.03) ———————— Sale of Turbine – – 0.02 ———————— Speculative trading 0.00 – (0.07) ———————— Twin Oaks III Impairment – (0.02) (0.02) ———————— Unrealized impairments of NDT securities – – 0.00 ———————— Total Non-Recurring Items 0.00 0.08 (0.28) ———————— GAAP Earnings (Loss) from Continuing Operations 0.09 (0.14) 0.63 GAAP Earnings (Loss) from Discontinued Operations 0.12 ———————————————————————- GAAP Net Earnings (Loss) $0.09 $(0.14) $0.75 ======================== Average Diluted Shares Outstanding: 78,151,325 Ongoing earnings include earnings from discontinued operations and exclude the impact of non-recurring items and net unrealized mark-to- market gains and losses on economic hedges. Ongoing earnings also exclude gains and losses from speculative trading activity and unrealized losses recorded as impairments of assets held in the Nuclear Decommissioning Trust.
PNM Resources Schedule 9: 2008 Reconciliation of EnergyCo GAAP Net Income to Ongoing EBITDA (Preliminary and Unaudited) September 30, 2008 ———————————— Three Months Ended Nine Months Ended —————— —————– (in thousands) GAAP Net Income (Loss) $ (2,308) $(58,917) Interest expense 3,662 15,019 Income tax 64 (229) Depreciation and amortization expense 7,659 22,886 Purchase accounting contract amortizations (1,996) 2,377 Losses on forward mark on economic hedges (28,287) 10,749 Speculative trading (2) 2,446 Write-off of emissions allowances 31,739 31,739 Impairment of intangible assets 321 22,851 —————— —————– Ongoing EnergyCo EBITDA 10,852 48,921 —————— —————– 50 percent of Ongoing EBITDA (PNMR share) $ 5,426 $ 24,461 ================== =================
PNM Resources Schedule 10: 2007 Reconciliation of EnergyCo GAAP Net Income to Ongoing EBITDA (Preliminary and Unaudited) September 30, 2007 ———————————— Three Months Ended Nine Months Ended —————— —————– (in thousands) GAAP Net Income (Loss) $ 18,815 $ 20,866 Interest expense 6,978 7,796 Income tax 399 399 Depreciation and amortization expense 5,790 7,318 Purchase accounting contract amortizations (27,842) (35,455) Losses on forward mark on economic hedges (526) (526) Speculative trading (215) (215) —————— —————– Ongoing EnergyCo EBITDA 3,399 183 —————— —————– 50 percent of Ongoing EBITDA (PNMR share) $ 1,700 $ 92 ================== =================
PNM Resources Schedule 11: 2008 Reconciliation of GAAP Net Earnings to Ongoing EBITDA by Segment (Preliminary and Unaudited) (in millions) Three Months Ended September 30, 2008 PNM TNMP PNM First Corporate PNMR Electric Electric Gas Choice & Other Consolidated ——————————————————— GAAP Net Earnings (Loss) $ 15.8 $ 8.1 ($0.6) ($16.5) ($12.3) ($5.5) Interest charges 20.3 4.2 3.4 1.8 12.8 42.5 Income taxes 9.5 4.9 0.8 (6.8) (10.7) (2.3) Depreciation and amorti- zation 21.0 9.9 0.0 0.6 4.5 36.0 ——– ——– ——- ——– ——— ———— EBITDA 66.6 27.1 3.6 (20.9) (5.7) 70.7 Ongoing adjustments 21.3 0.2 (5.9) 17.6 10.2 43.4 ——– ——– ——- ——– ——— ———— Ongoing EBITDA $ 87.9 $ 27.3 ($2.3) ($3.3) $ 4.5 114.1 ======== ======== ======= ======== ========= ============ Nine Months Ended September 30, 2008 PNM TNMP PNM First Corporate PNMR Electric Electric Gas Choice & Other Consolidated ——————————————————— GAAP Net Earnings (Loss) ($58.4) ($16.9) $ 24.6 ($101.0) ($45.9) (197.6) Interest charges 51.8 13.6 9.9 2.5 30.9 108.7 Income taxes (5.1) 10.6 16.3 (28.4) (32.7) (39.3) Depreciation and amorti- zation 62.8 27.0 0.0 1.7 13.2 104.7 ——– ——– ——- ——– ——— ———— EBITDA 51.1 34.3 50.8 (125.2) (34.5) (23.5) Ongoing adjustments 93.5 34.6 (15.9) 108.0 46.5 266.7 ——– ——– ——- ——– ——— ———— Ongoing EBITDA $ 144.6 $ 68.9 $ 34.9 ($17.2) $ 12.0 243.2 ======== ======== ======= ======== ========= ============
PNM Resources Schedule 12: 2007 Reconciliation of GAAP Net Earnings to Ongoing EBITDA by Segment (Preliminary and Unaudited) (in millions) Three Months Ended September 30, 2007 PNM TNMP PNM Electric Electric Gas Altura —————– ——- —— GAAP Net Earnings (Loss) $ 1.4 $10.2 ($3.3) $ 0.0 Interest charges 13.0 5.8 3.9 0.0 Income taxes 0.4 5.5 (2.1) 0.0 Depreciation and amortization 20.7 7.1 5.3 0.0 ——– ——– ——- —— EBITDA 35.5 28.6 3.8 0.0 Ongoing adjustments 32.4 0.3 0.3 0.0 ——– ——– ——- —— Ongoing EBITDA $ 67.9 $28.9 $ 4.1 $ 0.0 ======== ======== ======= ====== Nine Months Ended September 30, 2007 PNM TNMP PNM Electric Electric Gas Altura —————– ——- —— GAAP Net Earnings (Loss) $ 16.2 $15.4 $ 9.7 $ 6.0 Interest charges 38.9 19.7 9.7 8.6 Income taxes 9.6 7.8 6.3 3.9 Depreciation and amortization 62.2 21.1 16.3 7.7 ——– ——– ——- —— EBITDA 126.9 64.0 42.0 26.2 Ongoing adjustments 39.6 0.3 (0.3) 0.0 ——– ——– ——- —— Ongoing EBITDA $166.5 $64.3 $ 41.7 $26.2 ======== ======== ======= ====== Three Months Ended September 30, 2007 First Corporate PNMR Choice & Other Consolidated ——- ———————- GAAP Net Earnings (Loss) $ 2.7 ($2.6) $ 8.4 Interest charges 0.6 12.0 35.3 Income taxes 1.7 (3.4) 2.1 Depreciation and amortization 0.5 3.1 36.7 ——- ——— ———— EBITDA 5.5 9.1 82.5 Ongoing adjustments 6.3 4.9 44.2 ——- ——— ———— Ongoing EBITDA $11.8 $ 14.0 126.7 ======= ========= ============ Nine Months Ended September 30, 2007 First Corporate PNMR Choice & Other Consolidated ——- ———————- GAAP Net Earnings (Loss) $15.0 ($4.0) 58.3 Interest charges 1.8 24.3 103.0 Income taxes 9.1 (31.7) 5.0 Depreciation and amortization 1.4 8.2 116.9 ——- ——— ———— EBITDA 27.3 (3.2) 283.2 Ongoing adjustments 6.6 16.1 62.3 ——- ——— ———— Ongoing EBITDA $33.9 $ 12.9 345.5 ======= ========= ============
PNM RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ——————- ———————– 2008 2007 2008 2007 ——— ——— ———– ———– (In thousands, except per share amounts) Operating Revenues: Electric $607,023 $569,575 $1,551,668 $1,511,814 Other 53 334 221 708 ——— ——— ———– ———– Total operating revenues 607,076 569,909 1,551,889 1,512,522 ——— ——— ———– ———– Operating Expenses: Cost of energy 393,623 375,006 1,026,702 903,283 Administrative and general 60,999 56,507 167,753 165,434 Energy production costs 46,471 57,223 143,231 156,279 Impairment of goodwill and other intangible assets 7,906 – 144,085 – Regulatory disallowances – – 30,248 – Depreciation and amortization 36,752 31,441 105,438 100,504 Transmission and distribution costs 14,981 14,347 43,467 43,955 Taxes other than income taxes 12,680 12,153 39,032 45,484 ——— ——— ———– ———– Total operating expenses 573,412 546,677 1,699,956 1,414,939 ——— ——— ———– ———– Operating income (loss) 33,664 23,232 (148,067) 97,583 ——— ——— ———– ———– Other Income and Deductions: Interest income 7,248 10,144 17,190 27,519 Gains (losses) on investments held by NDT (5,697) 3,897 (10,079) 6,898 Other income 2,834 1,574 4,950 5,294 Equity in net earnings (loss) of EnergyCo (1,485) 10,556 (29,091) 12,166 Minority interest in (3,451) (4,452) earnings of Valencia – – ——— ——— ———– ———– Other deductions (1,785) (2,037) (8,866) (8,517) Net other income and deductions (2,336) 24,134 (30,348) 43,360 ——— ——— ———– ———– Interest Charges: Interest on long-term debt 29,518 21,298 72,622 58,197 Other interest charges 9,634 10,088 26,384 35,084 ——— ——— ———– ———– Total interest charges 39,152 31,386 99,006 93,281 ——— ——— ———– ———– Earnings (Loss) before Income Taxes (7,824) 15,980 (277,421) 47,662 Income Taxes (Benefit) (3,109) 4,212 (55,587) (1,340) Preferred Stock Dividend Requirements of Subsidiary 132 132 396 396 ——— ——— ———– ———– Earnings (Loss) from Continuing Operations (4,847) 11,636 (222,230) 48,606 Earnings (Loss) from Discontinued Operations, net of Income Taxes (Benefit) of $820, $(2,139), $16,299 and $6,337 (638) (3,264) 24,622 9,671 ——— ——— ———– ———– Net Earnings (Loss) $ (5,485) $ 8,372 $ (197,608) $ 58,277 ========= ========= =========== =========== Earnings (Loss) from Continuing Operations per Common Share: Basic $ (0.06) $ 0.15 $ (2.72) $ 0.63 Diluted $ (0.06) $ 0.15 $ (2.72) $ 0.62 Net Earnings (Loss) per Common Share: Basic $ (0.06) $ 0.11 $ (2.42) $ 0.76 Diluted $ (0.06) $ 0.11 $ (2.42) $ 0.75 Dividends Declared per Common Share $ 0.125 $ 0.230 $ 0.480 $ 0.690
The following table shows PNM Electric operating revenues by customer class, including intersegment revenues and average number of customers: Three Months Ended Nine Months Ended September 30, September 30, —————————- ————————– 2008 2007 Change % 2008 2007 Change % —— —— ————– —— —— —— —– (Dollars in millions) Residential $ 89.3 $ 78.0 $ 11.3 14.5 $227.1 $204.2 $22.9 11.2 Commercial 98.9 85.7 13.2 15.4 248.0 223.6 24.4 10.9 Industrial 27.3 25.7 1.6 6.2 78.4 74.9 3.5 4.7 Transmission 7.7 7.2 0.5 6.9 19.2 20.4 (1.2) (5.9) Other retail 11.5 9.5 2.0 21.1 27.2 23.8 3.4 14.3 Wholesale long-term sales 43.7 50.5 (6.8) (13.5) 126.3 112.4 13.9 12.4 Wholesale short-term sales 78.0 103.9 (25.9) (24.9) 268.9 241.8 27.1 11.2 —— —— ——- —— —— —— $356.4 $360.5 $ (4.1) (1.1) $995.1 $901.1 $94.0 10.4 ====== ====== ======= ====== ====== ====== Average retail customers (thousands) 495.6 490.0 5.6 1.1 494.7 488.3 6.4 1.3 ====== ====== ======= ====== ====== ======
The following table shows PNM Electric GWh sales by customer class: Three Months Ended September 30, ——————————– 2008 2007 Change % ——- ——- —————- (Gigawatt hours) Residential 898.8 945.9 (47.1) (5.0) Commercial 1,142.6 1,181.3 (38.7) (3.3) Industrial 408.1 488.6 (80.5) (16.5) Other retail 80.6 79.9 0.7 0.9 Wholesale long-term sales 740.5 867.8 (127.3) (14.7) Wholesale short-term sales 764.7 1,601.8 (837.1) (52.3) ——- ——- ——— 4,035.3 5,165.3 (1,130.0) (21.9) ======= ======= ========= Nine Months Ended September 30, ———————————– 2008 2007 Change % ——— ——– ——— —— (Gigawatt hours) Residential 2,474.7 2,471.5 3.2 0.1 Commercial 3,069.2 3,050.9 18.3 0.6 Industrial 1,260.4 1,453.1 (192.7) (13.3) Other retail 211.4 199.7 11.7 5.9 Wholesale long-term sales 2,167.7 2,042.5 125.2 6.1 Wholesale short-term sales 2,883.9 4,055.7 (1,171.8) (28.9) ——— ——– ——— 12,067.3 13,273.4 (1,206.1) (9.1) ========= ======== =========
The following table shows TNMP Electric operating revenues by customer class, including intersegment revenues, and average number of customers: Three Months Ended September 30, ————————– 2008 2007 Change % —— —— ———— (Dollars in millions) Residential $ 22.3 $ 23.4 $(1.1) (4.7) Commercial 18.0 19.2 (1.2) (6.3) Industrial 3.5 2.1 1.4 66.7 Other 7.3 8.0 (0.7) (8.8) —— —— —— $ 51.1 $ 52.7 $(1.6) (3.0) ====== ====== ====== Average customers (thousands(1)) 230.3 226.8 3.5 1.5 ====== ====== ====== Nine Months Ended September 30, ——————————— 2008 2007 Change % ———— —— —— —— (Dollars in millions) Residential $ 55.4 $ 53.8 $ 1.6 3.0 Commercial 53.5 52.9 0.6 1.1 Industrial 10.0 5.6 4.4 78.6 Other 21.5 24.8 (3.3) (13.3) ———— —— —— $140.4 $137.1 $ 3.3 2.4 ============ ====== ====== Average customers (thousands(1)) 229.0 225.8 3.2 1.4 ============ ====== ====== (1) Under TECA, customers of TNMP Electric in Texas have the