PNM Resources’ earnings increase

Strong retail load growth of 7% contributed to earnings growth at PNM Resources’ (NYSE:PNM) transmission and distribution utility Texas-New Mexico Power (TNMP), Pat Vincent-Collawn, PNM Resources chairman, president and CEO, said during the company’s quarterly earnings call on Aug. 3.

However, she noted the growth “was tempered by a cooler start to the summer in Texas when compared with 2011.”

PNM Resources on Aug. 3 reported unaudited 2Q12 consolidated GAAP earnings of $21.5m and quarterly unaudited, consolidated ongoing earnings of $26.5m, compared with $4.1m and $18.2m, respectively, during 2Q11.

For the first six months of 2012, the company reported unaudited consolidated GAAP earnings of $38.6m and unaudited, consolidated ongoing earnings of $40m, compared with $20.7m and $22m, respectively, during the first half of 2011.

TNMP reported ongoing earnings of $8.1m, and GAAP earnings of $8.0m in 2Q12, compared with $6.9m and $4.1m, respectively, during the same period in 2011.

Company officials said higher retail rates and warmer weather also contributed to higher earnings elsewhere.

Public Service Company of New Mexico (PNM), the company’s vertically integrated utility in New Mexico, reported ongoing earnings of $21.6m and GAAP earnings of $16.8m, compared with earnings of $12.5m and a loss of $1.5m, respectively, in 2011.

Along with higher retail rates, increased usage as a result of warmer June weather, and lower outage costs were cited as reasons for the improved earnings. However, lower sales prices associated with the Palo Verde Nuclear Generating Station unit 3 put downward pressure on earnings, according to Chuck Eldred, PNM Resources’ executive vice president and CFO.

Corporate performance, which is primarily comprised of interest expense related to debt, reported ongoing and GAAP losses of $3.3m in 2Q12 compared with 2Q11 ongoing losses of $4.5m and GAAP losses of $5.2m.

Strong overall performance, coupled with PNM Resources’ purchase of outstanding equity securities in late 2011, improved ongoing earnings per diluted share. Earnings per diluted share for ongoing earnings in 2Q12 were 33 cents, compared to 20 cents per share in 2Q11. On a GAAP basis, earnings per diluted share were 27 cents in 2Q12 compared to 4 cents in 2Q11, Vincent-Collawn said.

Effects of ongoing regulatory actions

In July, the company announced a settlement of its transmission rate case with FERC (Docket No. ER11-1915). The “black box” settlement calls for a $2.9m increase in transmission revenues and includes an agreed-upon revenue number but no specific return on equity, Vincent-Collawn said.

“One of the most important aspects of this settlement is the fact that the parties agreed not to oppose the concept of a formula-based transmission rate filing,” she added.

Once the settlement is approved by FERC, PNM will have one year to file for a formula-based rate. “The formula-based rates will be key in helping PNM fully achieve a reasonable FERC transmission return on equity,” Vincent-Collawn said.

PNM has been billing at the higher rates associated with the transmission case in June 2011. Those rates are subject to refund, she added.

However, the matter is not expected to have an impact on future earnings, as the settlement falls in line with previously issued earnings guidance, according to Eldred.

The company has also reached a settlement in principle of a generation dispute with Navopache Electric Cooperative (Docket Nos. ER11-4535 and ER12-72). Terms of that settlement will remain confidential until the settlement is filed with FERC.