Good day, and welcome to the PNM Resources Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Lisa Goodman, Director of Investor Relations. Please go ahead.

Thank you, Cal, and thank you, everyone, for joining us this morning for the PNM Resources second quarter 2020 conference 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, President and CEO, Pat Vincent-Collawn; and Don Tarry, our Senior Vice President and Chief Financial Officer, along with a special guest, Chuck Eldred, Executive Vice President of Corporate Development and Finance. 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, and thanks to each of you for joining us today. It's been a few months since we've actually seen you all and we miss you. We hope that you continue to be as healthy and safe as we are. It's July 31 today, which means, not only is it National Avocado Day, it's the two-year anniversary of Chuck's favorite joke. He didn't quite nail at the first time, so we've set him up for success this time and given him the punch line. Chuck, what do you call an avocado that's been blessed by the Pope?

Pat, I had a similar comment when I heard the Commission make a decision on San Juan. And the answer to this question is holy guacamole.

Thank you, Chuck. Great. Well done. Before I get started, I want to thank our teams across New Mexico and Texas for all of their continued efforts to support our customers, while also supporting their own families and communities. In the face of COVID-19, they are continuing to rise to the occasion, and I am extremely proud to be part of their team. On today's call, after I walk through earnings and other key updates, I am going to highlight our ESG commitments and describe some examples of how these environmental, social and governance principles are a key part of our business priorities. So, let's begin on Slide 4. Our GAAP earnings per share in the second quarter of 2020 are $0.72. Ongoing earnings per share are $0.55, compared to $0.38 in the second quarter of last year. Higher summer temperatures have helped us to offset the changes in loads, resulting from COVID-related closures. We are targeting the midpoint of our affirmed guidance range of $2.16 to $2.26. Don will provide more on the financial details. There has been progress on key regulatory dockets at PNM and TNMP. The most recent update is Wednesday's decision from the New Mexico Commission on San Juan replacement power. The Commission decided to replace power from San Juan with the combination of renewable and battery storage PPAs. This fits in well with our goals for emissions-free energy and we are committed to investing in the infrastructure needed to integrate these resources and enable New Mexico to realize its full renewable potential. Our Wired for the Future program is even more critical in order to reliably deliver clean energy at an accelerated pace. In our decoupling filing at PNM, a procedural schedule has been set with hearings scheduled for October. This aligns with our request…

Thanks, Pat, and good morning, everyone. Turning to Slide 14 with an overview of our $0.55 of ongoing EPS for the second quarter, the increase over last year is largely due to mild weather that we experienced at PNM in Q2 of 2019. We also saw a reduction in outage costs at San Juan Generating Station as we move toward its retirement in the summer of 2022. The $0.55 also exceeded our expectations for the quarter due to strong weather impacts and shifting in discretionary plant maintenance from the spring to the fall for COVID-19 considerations. Slide 15 provides a summary of how we are currently thinking about COVID impacts as we continue to progress through our planning scenarios. We've moved through this time period that was considered Stage 2 in our original plan. We continue to see impacts in our customer class load trends, which we will update you on today based on current information. We have not seen any significant impacts to our investment plans from workforce disruptions or from supply chain issues. We do not expect any significant impacts in these areas as we move forward. Turning to Slide 16, I'll cover the low trends that we saw in the second quarter, as well as what we have seen in July. At PNM, residential usage continues to be around 5% higher, while commercial usage has shown some improvements in New Mexico. Our updated projection moving forward is for a 10% decline in commercial loads, compared to a 15% decline earlier this year. At TNMP, increases for volumetric load have offset decreases in demand-based load. The overall impact hasn't changed throughout the different phases of business restrictions in Texas. We'll continue to monitoring these trends across both PNM and TNMP. On Slide 17, we feel comfortable with our…

Thanks, Don. Before I open it up for questions, let me take one more opportunity to thank the team here at PNM Resources for continuing to perform brilliantly through these unique times. As we move forward, we are excited about our plans to deliver clean energy and the infrastructure growth that it will take us to realize the full potential of a clean energy economy. We look forward to sharing updates with you each quarter. And for example, just this week, PNM and the PNM Resources Foundation won first place in the Corporate Champion category of the Philanthropy Awards here in Albuquerque sponsored by Business First. So, Cal, let's please open it up for questions.

Certainly. [Operator Instructions] And our first question today will come from Ryan Greenwald with Bank of America. Please go ahead.

Good morning, team. Thanks for taking our questions. So, to follow on the order earlier this week, just curious how you guys are thinking about weighing your options. On the one hand, it seems like it kind of alliance with the ESG goals, but it may be causing some resiliency issues. So, how are you thinking about options here for potential appeal and then timing around any developments?

Yeah. Ryan, thank you. It doesn't make any sense to appeal the decision here. We may have some technical disagreements on some of the various statements, but we're really excited about the big step forward in our plans to exit coal and fully supportive to move to clean energy. We've got, as Don laid out, and I'll turn it over to him in a minute, a lot of system investments here. And now, it's our job to solve for the transmission side to make this thing work. So, Don?

Yeah. So, if we look at Wired for the Future, a lot of our system in New Mexico date back to 1960s and 1970s. And as we move the generation forward to renewables, it really requires a resilient system. And so, we've been in the works and planning our updates and upgrades to the system for the past year as the Commission made this ruling and we move forward, we'll be able to execute on this at a quicker pace. And we'll need to execute on this at a quicker pace and that kind of fits into our Wired to the Future and supporting a clean energy profile.

Got it. And then, can you provide a bit more color on trends so far in July specifically, as we've kind of seen reinstatement of some of the restrictions?

Yeah. So, I mean, what we've laid out in assumptions in both Texas and New Mexico is what we've seen. We saw a little better trend in New Mexico commercially we brought down from 15% down to 10%, and I'll tell you in July, it was a little less than that. And we've had also a warmer than normal July as well, too.

And coal, when you think about it, the only reinstatement of a restriction that Governor oppose was indoor dining. It's closed, and most of those folks that they can are still -- in their spaces, they're just having outdoor dining. Salsa makes us now wear -- all wear a mask when we exercise. So, I think that what she is doing makes a lot of sense. She is trying to set us up for success in the long-term by closing indoor dining. But nothing else really changed in terms of what would impact our load.

[Operator Instructions] And our next question will come from Anthony Crowdell with Mizuho. Please go ahead.

Hey. Good morning, Pat. Good morning, Chuck. Good morning, Don.

Good morning, Anthony.

Good morning.

It's good to hear your voice.

I miss you guys. Just -- hopefully, some easy questions and Chuck, appreciate the avocado joke. I wasn't sure if it is an avocado joke or a Pope joke. But it sounds better if it's an avocado joke. Offline I went to a -- I went to an All Boys Catholic High School, so offline I do have a lot of Pope jokes. But just if we could touch on just trends in uncollectibles or bad debt expense you're seeing in Texas and New Mexico? And then second question is, when we look at Wired for the Future, are there any projects that -- would that require a big approvals or big siting approvals?

Yeah. So, on our collections, both -- the good news in both New Mexico and Texas is both of them are provided for a regulatory asset treatment. New Mexico -- or Texas went a step further and we've already started to collect those. Texas continues to grow. Remember, we deliver to the retail electric provider, not the end-user customer. So, we are protected in Texas that way as well. In New Mexico, we have seen our uncollectible or we really call it our delinquents or our balance to go up. It's increased trends this time of year, about $3 million to $5 million is what we track in our zero to 120 days past due. It's up in the range of $8 million to $9 million, which we would expect with the disconnect policy turned off. That being said, we do have the reg asset to -- ability to record it to the reg asset. It's tied to the Governor's order. So when the Governor removes the order, then we are able to go collect. New Mexico, in general, once we move toward disconnection, that's when a portion of these customers will make their payment, and that's pretty standard.

And Anthony, our call center agents, obviously, we're not getting a lot of inbound calls right now are reaching out to people and getting many people setup on a payment arrangement because they don't want to necessarily pay when the big bill comes, as Don said, some of them will, but a lot of them are getting on payment arrangements now. So, do you want to answer the second question? Did that answer your first question, Anthony? And then, your second question is, are there any big projects in the Wired for the Future that require siting approval, correct?

Siting or to have potential delays, a large transmission project that goes over a national park or something like that?

Yeah. No, regulatory-type approvals in that element. Some of our substations might have some siting approvals with the local communities. But again, a lot of it's restructuring and expanding existing substations and repowering transmission lines and replacing poles that we already have right of ways on associated with that. Also, improving our distribution feeder system as well, which we already have right of ways on that as well.

And Anthony, when we do a big substation, there's a process called a 440 that you go through a commission, but it's just an informational filing, so.

Great. Thanks so much for taking my questions and hope everyone on the PNM team stays healthy.

Same with you. We hope to see you soon.

And our next question will come from Jonathan Reeder with Wells Fargo. Please go ahead.

Thanks for the humor at the front end of the call, it was need at the end of [indiscernible].

Any time, Jonathan.

Hey, couple of times you mentioned about needing to balance the needs in relation to potential future capex needs, whether that it's Company-owned generation or new T&D expansion. Does that mean we should not be thinking of those opportunities as being like additive to EPS power but rather simply displacing in otherwise planned spend?

First of all, one of the balancing -- one of the good things about our Wired for the Future is it spread over a little period of time. So adding the additional renewables in. From a customer impact, we don't see a significant impact. If you look at our earnings power, we'll actually see when we rollout 2024 that our rate base goes up because these are spread over a longer period of time. And we do have additional -- we've kind of laid out the initial program for Wired for the Future. But there is additional capital that we'll look at in this program that our VP of Transmission is very focused on as we kind of build the resilient system that's necessary as we progress toward the carbon-free by 2040.

Yeah. Jonathan, we have plenty of investment opportunities even with Wired for the Future, above and beyond that. But, as Don said, we've always tried to balance the customer impact. So, if we don't have PNM own generation, we will be able to bring forward those capital impacts. We are holding those back if we would have had PNM own generation because we didn't want a huge impact on customer bills. So, this move to renewable energy is only going to make for more investments on the distribution and transmission side because we need to have a resilient, robust system and integrate those resources. And a lot of the renewable sources are not near the load centers. So you end up having to build transmission. So, especially with the state policy aligned with renewables and transmission and our state senators, depending on what happens on the national stage in November, there will be plenty of opportunity, so.

Right. I mean, I guess, if you can keep your rating -- rate increase requests pressure on rates kind of reasonable, we could still see upside to, I guess, this pace of spend and potentially earnings growth because you have that opportunity. And maybe, I guess, if you buy an O&M cuts or something like that, it creates that lever to back it out. Is that fair?

That's fair.

Okay. And then, I know you said the procedural schedule for decoupling is set. I mean, have you received any initial feedback on the request? If not, how are you thinking about the ability to get approval?

I think the initial feedback we've gotten is the -- because of the legislation that was passed, I think some of the groups feel very favorable about it. There's always everybody that wants to tweak here and there. And there are some folks concerned with single issue rate making, but because of the back up in the legislation, we still feel very comfortable about it.

Okay. So, it just might be more around the actual design versus getting it.

Yeah. I mean, I think that -- I think a lot of people are going to spend time in decoupling cases. They always do arguing over design, so.

Okay. And then, lastly, the 2020 renewable plan filing, does it include any Company-owned resources this time around?

No.

Okay. Thanks so much.

Hey, Jonathan, this is Chuck. I got a question for you.

Don't turn the table [indiscernible].

No, I just want to know how you feel about playing -- Notre Dame playing in the ACC conference?

Yeah. That's kind of interesting, right? I mean, I guess, it takes a pandemic to get us -- to finally join a conference [indiscernible].

Well, it should be interesting. Now you guys may have to play Clemson, right?

Probably, yeah.

Yeah, yeah. Anyway, at least we got some football.

Hey, hope needs to be played, that's the key, right?

Yeah, that's right.

If we can at least play the game, so.

All right. That's all I wanted. I was just curious.

Thanks, Jonathan.

We'll see you.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Pat Vincent-Collawn for any closing remarks.

Thank you, Cal. And I just want to recognize that, Cal, was our operator two years ago and actually told us that avocado joke. So, we have to give credit to Cal for the avocado Joke. Thank you, Cal. Thank you, again, everybody, for joining us this morning. I hope you enjoy your guacamole that you're going to have this evening with your margarita or tequila and just make a toast to Cal and Chuck. We look forward to seeing you all as soon as we can safely. Please stay healthy and safe. Thank you.

And the conference is now concluded, thank you for attending today’s presentation. You may now disconnect your lines at this time, and have a great National Avocado Day.