PNM Resources Inc.

PNM CEO: ‘You Always Look’ At M&A

Feb. 8, 2024
Just weeks after Avangrid abandoned its acquisition plan, the Albuquerque-based company’s leaders have lifted their longer-term profit growth forecast.

Pat Vincent-Collawn most definitely didn’t say no.

The board chair and CEO of PNM Resources Inc. told analysts this week that her team is in “our deep-breath phase” on the heels of its plan to join forces with Avangrid Inc. falling through after more than three years of being in limbo. But she also said the Albuquerque-based utility’s leaders continue to think “that size is still important in this world and that the opportunity to access cheaper capital, to access material supplies, employee opportunities is still there.”

In short, PNM will be back in the M&A market when the conditions—interest rates, equity values and regulatory support—are lining up.

“It’s always been kind of an ongoing effort. We reassess every year the market outlook, the landscape of the industry, our position,” Vincent-Collawn said. “If the time is right, the time is right. If it's not right, it's not right. But you always look.”

Avangrid executives pulled the plug in early January on their plan to buy PNM—which the companies signed in October 2020—after long delays in getting New Mexico regulators’ approval. But Vincent-Collawn and her team haven’t been sitting still: Thanks in part to solid rate base growth, they have lifted their earnings growth outlook through 2028 to between 6% and 7% from their previous long-term target of 5%.

To drive home the point, the PNM team played Elton John’s “I’m Still Standing” before and after their fourth-quarter earnings conference call Feb. 6 and Vincent-Collawn repeatedly referenced the song’s lyrics during her commentary.

PNM executives expect the company’s load growth in New Mexico to top 3% in 2024 as new customers grow nearly 1% and several deferred industrial expansions kick off. At the company’s Texas operations—which have in the past five years grown to 38% of PNM’s rate base from 23%—they foresee residential load growth to be around 3% and commercial and industrial customers’ weather-normalized demand to grow by about 2%.

Those Texas operations will be the largest recipient of PNM’s planned $6.1 billion in capital investments over the next five years. President and COO Don Tarry told analysts there’s a good chance Texas capex will grow from current estimates: PNM’s $450 million budget for resiliency projects, Tarry said, is “a conservative number” and longer-term planning studies for parts of West Texas also could result in the PNM team revising up its forecasts.

Shares of PNM (Ticker: PNM) closed Feb. 7 at $36.96 after rising more than 2%. Over the past six months, however, they are still down nearly 20% thanks to Avangrid ending its purchase plan. PNM now has a market capitalization of about $3.2 billion.

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