PNM EARNINGS TURNAROUND
Hot weather, oil patch demand, economic gains contribute to 2% boost in Q2
PNM Resources’ net earnings rose by nearly 2 percent in the second quarter, fueled by hot weather, booming oil and gas operations in southeastern New Mexico and West Texas, and improvement in the local economy.
Net earnings increased from $37.6 million in second-quarter 2017 to $38.2 million this year. Earnings per share rose by a penny, from 47 cents in 2017 to 48 cents in the April-May period this year.
Although slight, the rise in earnings marks a sharp reversal from the last two quarters. Writeoffs related to tax reform led to $54.3 million in losses in fourth-quarter 2017. And in first-quarter 2018, PNMR’s local utility, Public Service Company of New Mexico, shouldered extra costs at its coal-fired power plants, including expenses from the closure of two generating units at the San Juan Generating Station near Farmington.
That pulled PNM’s net earnings down by 53 percent in the January-March period, lowering the parent company’s earnings by 34 percent.
In the second quarter, however, PNM’s net earnings remained flat at $26.5 million, down by just $300,000 from $26.8 million in the same period last year. The utility still faced extra expenses at its coal plants, including installation of pollution controls at the Four Corners Power Plant and a planned outage at San Juan.
But those costs were offset by new third-party transmission contracts, plus increased electric consumption as customers ramped up their coolers earlier than usual in May.
In addition, with New Mexico’s economy improving, the electric load rose by 1 percent in the quarter, PNM Chief Financial Officer Chuck Eldred told investors Tuesday morning.
“Cooling degrees were 36 percent higher than last year as temperatures began to heat up earlier than usual in May...and it hasn’t let up,” Eldred said. “That’s resulted in the hottest second quarter in 20 years.”
PNM has faced declining load growth for years, thanks to New Mexico’s sluggish economy, energy efficiency programs and customer-sited solar systems. But now, PNM is projecting a flat to one-half percent increase in load for 2018 and 2019.
“I believe we’re finally seeing some strength in our local economy,” Eldred said.
At PNMR’s other subsidiary, Texas New Mexico Power, hot weather and the Permian Basin oil and gas boom are fueling robust growth, with the electric load up 1.4 percent in the second quarter, and 2.5 percent from January-May. The company expects 5 to 7 percent growth in 2018, and 6 to 8 percent in 2019, Eldred said.
TNMP’s net earnings jumped 26 percent in the second quarter, from $12.2 million in 2017 to $15.4 million this year, offsetting PNM’s flat performance and boosting the parent firm’s earnings.
As a result, the company has raised its earnings guidance for 2018 and 2019, said PNMR Chairman, President and CEO Pat Vincent-Collawn.