Public Service Company of New Mexico’s net earnings plummeted to a $6.2 million loss in the second quarter of 2022, reflecting a sharp reversal from the $41.4 million in net income gains that the company reported in the same period last year.
Economic fallout from climbing interest rates and crashing stock markets are largely to blame. The company lost $39 million on investment securities in the three-month period from April-June, most of which were drawn from the utility’s decommissioning and reclamation trust accounts. That comes on top of $31 million in investment losses in the first quarter of this year.
As a result, net earnings for the six-month period from January-June fell by $1.9 million. That compares to $59.9 million in net-income growth that PNM earned in the first half of 2021.
The utility losses, in turn, dug into earnings at PNM’s parent firm, PNM Resources, which is also facing higher interest rates on nearly $1 billion in company debt.
PNMR’s net income fell 71% to $15.4 million in the second quarter, down from $53.8 million it reported in the same period last year, according to the company’s latest earnings report, released Thursday morning. That cut total net earnings from January-June by 56%, from $71.3 million in 2021 to $31.4 million this year.
Still, stellar performance at PNMR’s other utility, Texas New Mexico Power, significantly offset the earnings decline.
TNMP’s net income jumped by 66% from April-June, from $15.7 million in second-quarter 2021 to $26 million this year. Total earnings for the first half of 2022 climbed by 68% to $41.1 million, up from $24.4 million last year.
Economic expansion and searing summer heat in Texas are fueling “load growth,” or rising consumer demand, in TNMP’s service territory, said PNM Resources President and Chief Operating Officer Don Tarry. TNMP’s “volumetric load,” or residential and commercial demand, grew by 3.3% from April-June, while large-scale industrial consumption, known as “demand-based load,” leapt by 6.8%.
“(At) TNMP, weather and load had significant impacts in the second quarter,” Tarry told investors in an earnings conference call. “Both volumetric and demand-based load is growing above our expectations as the Texas economy spurs the expansion of our communities in the North Texas and Gulf Coast areas.”
In New Mexico, demand is also growing, but slower than anticipated, Tarry said. PNM’s total retail load rose by just 0.8% from April-June, reflecting milder weather here than in Texas during those months, plus delays in expected expansion by industrial customers due largely to supply-chain issues.
Consumer demand, however, picked up significantly in July as record-breaking heat hit the state, driving local electric consumption to a new system peak on July 19 for the first time since 2013. Increased income from that load growth will show up in the fall when PNM reports third-quarter earnings, potentially improving the utility’s economic performance. And industrial expansion is expected to continue as companies overcome supply-chain issues.
“The state’s economic development efforts continue to attract business relocations and expansions, and the current level of inquiries from potential customers is significant,” Tarry said.
PNM projects 2% to 3% overall load growth this year. And, despite current challenges, PNMR reaffirmed its 2022 earnings guidance of $2.50 to $2.60 per share.
Meanwhile, company efforts to transition PNM’s grid from fossil fuels to carbon-free generation are steadily progressing through shutdown of the final two operating units at the coal-fired San Juan Generating Station, said PNMR Chairman and CEO Pat Vincent-Collawn.
“We retired unit 1 … from service on June 30th,” Vincent-Collawn told investors. “This is a big step in our exit from coal, and the next step will be the full retirement of the plant when unit 4 closes down on Sept. 30. At that point, coal generation will comprise less than 10% of PNM’s total generation portfolio and more than half of our resources will be carbon-free.”